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Chapter

16

Managing Rapid Growth:

Entrepreneurship Beyond Startup

McGraw-Hill/IrwinNew Venture Creation, 7/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Exhibit 16.1

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Exhibit 16.3

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Issues Leading to Possible Crises in Rapid Growth

• Opportunity overload• Choosing from among an abundance of sales or new market

opportunity

• Abundance of capital• Evaluating investors as “partners” and the terms of deals with

which they were presented

• Misalignment of cash burn and collection rates• Cash burn rates racing ahead of collections

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Issues Leading to Possible Crises in Rapid Growth

• Decision making• Executing functional day-to-day and week-to-week decisions,

rather than strategizing

• Expanding facilities and space . . . and surprises• Coping with surprises, delays, organizational difficulties, and

system interruptions spawned by space or facility expansion

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Common Approaches to Successful Management

• Leadership• Roles, tasks, responsibilities, accountabilities, and appropriate

approvals clearly defined• Leadership based on expertise, not authority• Emphasis placed on performing task-oriented roles

• Consensus Building• Emphasis placed on overall goals• Emphasis on participation and listening

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Common Approaches to Successful Management

• Communication• Information sharing• Willingness to alter individual views

• Encouragement• Encouragement of innovation and calculated risk-taking

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Common Approaches to Successful Management

• Trust• Do what they say they are going to do• Traits include openness, spontaneity, and straightforwardness

• Development• Develop human capital

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Exhibit 16.7

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Chapter

18

The Entrepreneur and the Troubled Company

McGraw-Hill/IrwinNew Venture Creation, 7/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

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External Causes for Failure

• Recession

• Interest rate changes

• Changes in government policy

• Inflation

• The entry of new competition

• Industry/product obsolescence

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Internal Causes for Failure

• Inattention to strategic issues• Misunderstood market niche• Mismanaged relationships with suppliers and customers• Diversification into an unrelated business area• Mousetrap myopia• The big project• Lack of contingency planning

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Internal Causes for Failure

• General management problems• Lack of management skills, experience, and know-how• Weak finance function• Turnover in key management personnel• Big-company influence in accounting

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Internal Causes for Failure

• Poor planning, financial/accounting systems, practices, and controls• Poor pricing, overextension of credit, and excessive leverage• Lack of cash budgets/projections• Poor management reporting• Lack of standard costing• Poorly understood cost behavior

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Nonquantitative Signals of Trouble

• Inability to produce financial statements on time

• Changes in behavior of the lead entrepreneur

• Change in management or advisors, such as directors, accountants, or other professional advisors

• Accountant’s opinion that is qualified and not certified

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Nonquantitative Signals of Trouble

• New competition

• Launching of a “big project”

• Lower research and development expenditures

• Special write-offs of assets and/or addition of “new” liabilities

• Reduction of credit line

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Telltale Trends of Organizations in Trouble

• Ignore outside advice

• People (including and usual, most especially, the entrepreneur) have stopped making decisions and also have stopped answering the phone

• Nobody in authority has talked to the employees

• Rumors are flying

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Telltale Trends of Organizations in Trouble

• Inventory is out of balance

• Accounts receivable aging is increasing

• Customers are becoming afraid of new commitments

• A general malaise has settled in while a still high-stressed environment exists (an unusual combination)

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Turning Around a Troubled Company

• Diagnosis of the problem• Strategic analysis• Management analysis• Cash flow analysis

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Cash Flow Analysis

• Steps in identifying and quantifying the profitable core of the business• Determine available cash• Determine where money is going• Calculate percent-of-sales ratios for different areas of a

business and then analyze trends in costs• Reconstruct the business• Determine differences

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Potential Cuts/Improvements

• Most common areas for potential cuts/improvements• Working capital management• Payroll• Overcapacity and underutilized assets

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Kawasaki, Chapter 8

•Smart reasons for partnering•“spreadsheet reasons”•Areas that should be

covered/discussed•What will each organization deliver?•When will they deliver it?•Where will they deliver it?•What interim milestones must each

organization meet?

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Kawasaki, Chapter 8

•Accentuate each partner’s strengths

•Cut win-win deals

•Follow with the file – legal follows detailed plan

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Kawasaki, Chapter 8

•Everybody deserves and “out” clause

•Watch the “lies,” rationalizations, and other sales pitches YOU might hear…

•Get past the emotion to the detail

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Kawasaki, Chapter 8

•Schmoozing (In person/Email/Otherwise)•Network – Get Out and meet people•Listen more than you speak•Follow up – within 24 hours•Give contact information•Be passionate•Read•Do favors/return favors/ask for favors

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Kawasaki, Chapter 9

•Branding•You must define yourself and your business clearly (contagiousness):

Cool, effective, distinctive, disruptive of the status quo, emotive, deep (capabilities beyond the obvious), indulgent, supported.

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Kawasaki, Chapter 9

•Everything about your product or service must be obvious, simple, easily understood by the consumer…

•Simplicity takes thought and time

•Surround yourself with people who believe in your product or service

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Kawasaki, Chapter 9

•See the “art of speaking” tips on page 183:

•This is why you must be passionate about what you do…

•To appear genuine and interesting you must be genuinely interested!

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Kawasaki, Chapter 10

•Rainmaking

•Every business will change as the market demands it to….If you are smart, you will change too!

•See the Gorilla … what’s that about?

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Kawasaki, Chapter 10

•Rainmaking

•Find the key influencers and contact them…build a relationship with them

•“Suck down” pay attention to mid and lower level employees

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Kawasaki, Chapter 10

•Rainmaking

•Learn from rejections…yes, there will be rejections, even Kawasaki thinks so…

•You can’t convince everyone…