Entrepreneurial Growth

Why do entrepreneurs fail to manage growth? (Entrepreneurial Skills such as product development vs managerial skills)

Limited time and resources to spend on efficient organization building

Why do organizations need entrepreneurial spirits as it grows?

Customer needs change

Competitors offer superior products or services

Economic conditions, politics, technology, etc. shifts create a constantly changing opportunity set

Start-up Versus Growth

Start-up: acquire resources, entrepreneurs do everything,

Growth: deal with systems, structures, and culture

Options for entrepreneurs (based on success of an venture and desire of the entrepreneur):

Sell

Maintain

Grow

Three Driving Forces: start-up versus growth

Start-up: entrepreneur, opportunity, resources, and business plan

Growth: leadership, opportunity domain, and organizational resources and capabilities, and execution

Both face uncertainties(competitor introducing a superior product) and environmental conditions

Growth potential is largely impacted by stakeholders

Execution

No adequate system of control: uncontrolled growth can lead to poor coordination between sales and inventory planning

Instituting controls: first simple

Accounts receivable and collections policies

Inventory management system

Account payable policies

Assessment of performance and expenditures

Metrics to track trends in cash,receivables,inventory, payable,expenditures, and performance

Marketing cost expands quickly with escalating sales

For analysis and future investment decision making:

Which products or markets generate the highest revenues and margins?

Which customers or customer groups are reliable accounts?

How effective are our expenditures in areas such as marketing and sales, and does it differ across markets?

Tracking Performance

use industry averages for comparison (more useful for established firms)

trends in metrics over time

performance measure should be as simple and inexpensive to track as possible...