Could you be an Entrepreneur - Essay Example

?Running Head: Entrepreneur Entrepreneur [Institute’s Entrepreneur Introduction According to its basic definition, ‘entrepreneurship is the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving and resulting rewards of monetary and personal satisfaction and independence’ (Bygrave & Zacharakis, pp. 78-79, 2010). Without any doubts, entrepreneurship has been one of the most exciting and interesting topics for both, the corporate and the academic world. There are various stories of successful entrepreneur, the ones that have changed the course of the history and the humankind owes a lot to them. These people are still alive in history, in their inventions and in the hearts and minds of the people, and they continue to inspire many people. However, the dark side of entrepreneurship is that not all people make it to level where they earn a place in the history. In fact, statistics reveal that more than half of the small businesses fail in their first year of business. Furthermore, the bankruptcy fillings have been increasing over the past few years (Keister, pp. 19-23, 2005). This paper is an attempt to explore the reasons of the same. The paper would present the reasons why majority of the entrepreneurs fail to manage their growth phase and what allows entrepreneurs to do the same with effectiveness. Discussion Following are some of the reasons why entrepreneurs fail to manage their growth. Growth Strategy One of the biggest issues entrepreneurs face once they have overcome the inertia of business is the absence of a clear strategy. Most small businesses are opened based on intuitions, advices of colleagues, peers, family and friends, raw data, assumptions and others. Furthermore, since most entrepreneurs want to make it simple, they do not plan things extensively, and just allow things to “let happen.” Entrepreneurs prefer their business to be a rollercoaster ride rather than planning and strategizing like other businesses do (Kuratko, pp. 287, 2008). However, once they get going and enter into their growth phase, they fail to understand that the reactive approach, unplanned approach, uncalculated, intuition based strategy is less likely to work. When a firm grows, it is exposed to the market competition and other competitive forces like that of buyer power, supplier power, threat of new entrants, and threat of substitute products. When a firm grows, it catches the attention of many competitors and rivals, which had previously avoided the entrepreneur as posing no threat (Audretsch, pp. 23-43, 2002). Therefore, the point is that while growing, an entrepreneur has to choose a clear and well-defined growth strategy (Bygrave & Zacharakis, pp. 78-79, 2010). Now successful entrepreneurs are able to understand that there are only three types of four distinct types of growth strategies available for the firm. These are ‘penetration strategy, product development strategy, market development strategy, diversification strategy’ (Crane & Meyer, pp. 112-115, 2010). Penetration strategy calls for operating in the existing market with the existing product. The idea here is to increase the usage of customers by encouraging them to buy more of the same product. The same can be done with the help of marketing, promotional offers, little modifications in the product and others. Important here to note is that the entrepreneur would not look to target any other customers, segment or try to take away share from other competitors (Crane & Meyer, pp. 112-115, 2010). By pursuing a market development strategy, the entrepreneur tries to reach out new geographic, demographic, psychographic, and other markets and segments for its existing product. Moreover, it is also possible to pursue a market development strategy by communicating a new use of the product thus increasing the customer base. Successful entrepreneurs may also go for product development strategies. Many smart entrepreneurs, once they sense that competition is increasing, would try to stand out of the crowd by modifying the product or creating new products of the same portfolio and selling them to the same customer base. Lastly, entrepreneurs may also go for a diversification strategy. When entrepreneurs sense that the market is becoming extremely unfavorable due to growth and competition, the entrepreneur may move to new markets with a new product (Garcia, Ribeiro & Roig, pp. 418-419, 2007). Pressures on Existing Financial Resources Without any doubts, when a firm enters into the growth phase, the pressure on the firm’s financial resources increases. Important here to note is that most entrepreneurs start their businesses with all their savings, loans, or investments. Their business represents all of their financial resources. However, growth along with itself brings those unexpected expenses that can push the firm over the edge and into bankruptcy. When entrepreneurs find themselves in need of more cash when their business has not even reached the point of break even and all of their finances have been consumed by the business, they find themselves in deep trouble (Casson & Buckley, 459-462, 2010). Entrepreneurs that make it to the next stages of business life cycle, they do the same by exercising extensive financial control. They ensure that they start their business with a clear business plan, which includes a clear financial plan. They use orthodox methods of managing the cash flow, profits, and expenses, inventories, fixed assets, taxes and others (Mariotti & Glackin, pp. 166-168, 2009). Pressures on Existing Human Resources When a firm faces an increase in the demand, it increases the pressure on the existing employees of the company. Many problems emerge regarding the human resources when any firm is growing. First, with increased demand, there comes a need to hire new people. Mostly, entrepreneurs start with a few people whom they know or recruit them because of a mutual friend or suggestions; however, those informal techniques are less likely to work when the firms enters the growth phase. Second, with the influx of new employees, the old employees may feel corned. Employees that have seen the company from in infant baby to a teenager, they develop a special association of with the company. In fact, what they do, becomes the company culture but with the entry of new employees, they may feel that they power is no longer there with the same intensity (Casson & Buckley, 459-462, 2010). This may create a sense of alienation, demotivation, and dissatisfaction amongst the employees and may result in decrease in productivity. Third, employees even find themselves, dissatisfied and frustrated, when no new employees become a part of the company. This means that they work burden on their shoulders increases and rarely do they have their salaries increased with the same percentage. Fourth, during the early stages, the entrepreneur himself tends to perform many tasks on his own, along with the administration and management. However, as the company grows, he may not be able to perform any of the first line jobs and may remain restricted to managerial and administrative tasks of supervising, leading, and controlling others. The problem here arises when the entrepreneur finds difficulty in delegating the tasks to others. Trusting the employees, providing them with training, authority, having faith in them, encouraging them are some of aspects where many entrepreneurs fail to perform well thus leading doors to their failure (Mariotti & Glackin, pp. 166-168, 2009). Successful entrepreneurs are the ones that are able to understand the importance of soft skills while managing their human resource during the growth stages. First, it is important to train the new employees and tell about the corporate culture of the firm. It is important that they must become a part of the firm rather than the company becomes a part of them. Second, successful entrepreneurs also understand the need for coaching, counseling, and understanding their employees (Drucker, pp. 188-190, 2007). They understand that they productivity would not increase if the employees are not given authority, control and empowerment. Third, it also very crucial to take the advantage of the size of the firm and ensure that information is communicated effectively in the company and all employees are onboard for all the crucial decisions of the company (Wiklund, pp. 39-42, 2006). Fourth, smart entrepreneurs also understand that the pay structure that they used in the initial stages and the pay structure for the growth stages must be different from each other. Most likely, successful entrepreneurs quickly shift themselves from fixed based pay to a performance based pay structure. All these steps allow the entrepreneurs to create a culture of productivity and high employee satisfaction (Baron & Shane, pp. 256-258, 2007). Pressures of management style and organisational culture Entrepreneurs are risk takers, innovative, creative, and different people, who prefer power, control, and authority and do not believe in orthodox corporate cultures and management styles. They believe that it is better to take risks and allow the life to become a rollercoaster rise rather than taking the common 9-5 jobs and being controlled by some boss who is highly likely to be less competent than what these entrepreneurs think of themselves. However, the biggest dilemma, which the entrepreneurs find themselves facing, is when they grow and realize that their firm is also becoming like the organisations, which he rejected to work with. Suddenly, they start feeling that they have become the same boss under which they did not want to work. The have created the same organisation, organisational systems, and organisational culture which they do not prefer to have an association with (Garcia, Ribeiro & Roig, pp. 418-419, 2007). This is true because whenever a firm is growing, it has to take a shift from its informal, causal, rollercoaster ride type, unplanned, intuitive management style, organisational culture to a more bureaucratic, planned, formal, authentic management style, and organisational culture. Many entrepreneurs who fail, fail at understanding the fact that in order to grow and survive, this is the time that they would have to “let go” the old style of management and move a new style which is compatible with the needs of the growing organisation (Baron & Shane, pp. 256-258, 2007). Successful Entrepreneurs would be smart enough to plan not for the initial phase but also for their growth phase. They would not fall in love with the informality but be happy to change as the situation demands. These smart entrepreneurs know that change management is important and would do the same by communicating it to the employees and taking everyone on board for the same (Mariotti & Glackin, pp. 166-168, 2009). Pressures of Entrepreneur’s time Research has revealed that amongst married entrepreneurs, the divorce and separation rate is much higher as compared to non-entrepreneur males (Crane & Meyer, pp. 112-115, 2010). The point here is that when a person starts a business, it is like an infant baby, a dream come true and effort of a lifetime to the entrepreneur. He or she would make utmost efforts to ensure its smooth running and success. However, that requires not only effort but a lot of time as well. This means that the entrepreneur would have less time for himself or herself, relationship’s children, personal life, health, recreation, and other commitments. Eventually, many entrepreneurs find themselves in a situation where they have to select either their dream or their relationships. In either of the cases, most likely, the business would be greatly affected. This is true because even if the person chooses his or business, it is most likely the trauma of separating or ending the relationship would put the entrepreneur into so much of mental stress that he would be ruined for the business as well (Bygrave & Zacharakis, pp. 78-79, 2010). Successful entrepreneurs are good time managers as well. They know how to delegate their responsibility to others and how to maintain balance and harmony between their work and personal life. References Audretsch, David B. 2002. Entrepreneurship. Springer. Baron, Robert A., & Shane, Scott Andrew. 2007. Entrepreneurship: a process perspective. Cengage Learning. Bygrave, William D., & Zacharakis, Andrew. 2010. Entrepreneurship. John Wiley and Sons. Casson, Mark, & Buckley, Peter J. 2010. Entrepreneurship: Theory, Networks, History. Edward Elgar Publishing. Crane, Frederick G., & Meyer, Marc H. 2010. Entrepreneurship: An Innovator's Guide to Startups and Corporate Ventures. SAGE. Drucker, Peter F. 2007. Innovation and Entrepreneurship. Butterworth-Heinemann. Garcia, Alvaro Cuervo., Ribeiro, Domingo, & Roig, Salvador. 2007. Entrepreneurship: concepts, theory, and perspective. Springer. Keister, Lisa A. 2005. Entrepreneurship. Emerald Group Publishing. Kuratko, Donald F. 2008. Entrepreneurship: Theory, Process, and Practice. Cengage Learning. Mariotti, Steve, & Glackin, Caroline. 2009. Entrepreneurship: starting and operating a small business. Prentice Hall. Wiklund, Johan. 2006. Entrepreneurship. Emerald Group Publishing. Read More