Entrepreneurship and New Venture Creation

BMAL 603 - Entrepreneurship

Liberty University

Abstract

The paper is a concise review of the module on new venture creation. Almost every aspect

that is required of an entrepreneur is covered in this module and also mentioned in the paper.

Diverse subject areas like new venture start-up risk, funding and financing of new ventures,

business plans for a new venture, concepts like harvest goal and models that help in decision

making have been covered here. Many small and medium ventures are started by individual

or families. In such a scenario, the problems found in family owned ventures and the ways in

which they can be solved have also been covered. The mindsets and methods model of

entrepreneurship is an example of such a model. The concept of franchising and its backbone,

the service delivery system is also a part of this paper. The layout of this paper has been done

on the same model as the topics were learnt, week by week. This is only a brief description

and review of the whole module, since what has been learnt in the past several weeks is very

large for a full depiction. This module is ideal for businessmen, prospective and current

managers and those who are planning to start new ventures.

Introduction

The past seven weeks of the module on entrepreneurship and starting new ventures has been

an extremely useful session. It has been doubly advantageous because I am a reasonably

successful entrepreneur myself (as the owner and managing director of Thai Lay Fashion

Company). The information and education gained from this module will help to improve my

business and help me in fine-tuning many aspects and processes in the business. This paper is

an attempt to present all that has been learnt in the module in a concise and coherent form.

All the main topics that have been covered will be briefly mentioned in the introduction

before moving on to the main body of the work. The usual housekeeping details as mentioned

in the assignment will be given at the end of the paper just before the conclusion. The initial

chapters were concerned with the concept of economic and personal freedom which is one of

the main reasons why people become entrepreneurs. A case study of a person called Kurt

Bauer was also reviewed. A marketing plan for an organization with regard to the issues of

starting a venture was also done. The difference between an idea and an opportunity, and how

entrepreneurs use the business plan process to identify the best team members, director, and

value-added investors was also studied. The importance of factors other than finance was also

discussed. Another interesting section was the difference between and entrepreneur and an

administrator. The concept of employee motivation, and rewards was also very informative

and useful.

Next section was about the role of the top management and mangers with regard to employee

recruitment and retention. Proper care and effort should be taken by a new entrepreneur while

in the act of a new venture creation. The topic related to that was the due diligence and

evaluation process required by potential investors. The different sources of finance that is

available to an entrepreneur in the process of venture creation came next. Financing was

studied in depth in the next chapter with regard to debt and equity financing. Franchising is

an import and popular way of doing business. The most important part of the franchise

process is the creation of a service delivery system. This was what was studied next. The

concept of harvest goad was studied as the second last chapter in the module. The last module

was in fact in the form of an interview. It was with regard to problems faced by family owned

businesses and an analysis of the interviewee’s business with the Mindset and Methods

model was done. The whole module will be given in a concise form in the coming sections.

Real life examples with references to the topics covered will be given wherever possible. It is

to be noted that the examples will focus mostly on small and medium businesses since the

topic is related to that concept.

Week 1

The Entrepreneurial Mind & Process

The following definition though long clearly states what entrepreneurship is all about. “It is

the dynamic process of creating incremental wealth. The wealth is created by individuals who

assume the major risks in terms of equity, time and/or career commitment or provide value

for some product or service. The product or service may or may not be new or unique, but

value must somehow be infused by the entrepreneur by receiving and locating the necessary

skills and resources.” (Hisrich, Peters and Shepherd 2004, p.8). This will replace the need for

a long winded explanation about the concept. A person who engages in the above activities is

an entrepreneur.

Steps to lessen failure and increase chance of success

Even though failure rates of new businesses are quite high, the following steps can be

followed so that chances of success will be increased.

Adequate capital: One of the most important things that a start-up should ensure is to have

adequate capital (including working capital). Capital can be obtained though financial

institutions like banks, angel investors or though the concept of venture capital (VC). Each

financial institution will have their own policies on providing loans depending on the type of

business, the reputation of the businessman, the security he can provide etc. “Angel investors

are individuals who invest in businesses looking for a higher return than they would see from

more traditional investments.” (Angel Investors. 2008). Most have their own criteria for

providing finance and will usually insist on a board position and the right to provide

consultancy to the start-up venture. Venture capital is the least risky way to start a business.

Match between Capital and the Opportunity: Every idea and opportunity needs a certain

amount of capital to be successful. So, plan according to your capital available. The

opportunity itself should be studied thoroughly for its feasibility.

Other factors: Other factors that contribute towards the success of a new venture include

understanding the competition, competent employees, and the ability to conduct the day to

day running of the business.

Normative Case Method

Decision making is an important and often crucial function of an entrepreneur. He or she will

be faced with situations that may seem difficult to understand and come to conclusion. One of

the methods to overcome this is to use what is known as the normative method of analysing

given situations. A graphical representation of the analysis process is given below. This

section will be the analysis of a given case study using the normative analysis method.

Figure 1. Starting points (Routioo 2007).

“Normative approach aims at finding out not only how things are, but above all how they

should be, which means that it will be necessary to define the subjective point of view that

shall be used, in other words to select the people who shall evaluate the proposals which aim

at improving the object of study.” (Routioo 2007).

Kurt Bauer case study

Kurt Bauer is a young business graduate who has two options, one becoming a businessman

partnering with his brother and a few other associates and the other to work under a

businessman called Ludwig (salary, commission and a possible future partnership). The

mindset of the man presented in the picture is that he has dreams of becoming a big

businessman. The problem for Kurt is which option to choose here. He can go and work

under Ludwig in the future hope of getting a full partnership and he can start a venture on his

own. The problem (defined) is that both cannot be done simultaneously without negatively

affecting the outcome of the two options. This is not a major issue and Kurt will most

probably opt for the second option. The main problem is that nearly half of new business

ventures fail to succeed and Kurt is about to start one on his own. The solution is that Kurt

should go into business on his own with financial help from his venture capitalist uncle and

his brother. Alternative solutions include availing the services of a professional venture

capitalist, taking a loan, or getting capital from angel investors. As for the decision on the

issue, Kurt should get collateral from his uncle (instead of a loan) and use it to get capital

from a bank or similar institution. He can release the collateral once the loan has been repaid

or he has enough assets on his own.

Venture Capital and angel investors in Hong Kong

Hong Kong has a vibrant international trade and business history and its venture capital

industry is very strong. “Hong Kong is the largest venture capital centre in Asia, having the

second largest concentration of venture capital professionals in the region and managing 32%

of the total capital pool in the region.” (Hong Kong Venture Capital Sector. 2009). The

region has a strong association for the protection of venture capitalists called the Hong Kong

Venture Capital and Private Equity Association (HKVCA). It was formed in 1987 with the

primary objective of having an organized body to provide such capital and also for protecting

the interests of venture capitalists and private equity financing companies in the country. The

region also has an organization for connecting potential new venture entrepreneurs to angel

investors and funds under the name of Hong Kong Angel Capital Network (HKACN).

Week 2

Difference between an Idea and an Opportunity

An opportunity is differentiated from an idea in terms of its marketing possibilities. All

opportunities are exploitable for business growth and customer acceptance. Opportunity is

profitable for business. But all business ideas are not marketable or profitable for the business

firm. Before undertaking an opportunity as a business, the needs and demands of targeted

customer group has to be identified properly. For modifying the opportunity as a business

way, the personal skills of entrepreneurs have to be applied on it. (What is the Difference

Between a Business Idea and an Opportunity. 2009). “An idea is a thought that lacks action

and potential for profit. An opportunity, on the other hand, is an idea that can be executed, at

a profit, within an undetermined period of time (a window of opportunity).” (Steward 2008).

For converting an idea in to an opportunity, judgment of the created ideas have to be done

quickly by using the Venture opportunity screening Exercises (VOSE). The concept is

explained below. An idea occupying money making characteristics are considered as

opportunity. Only few of the ideas are advantages for business through customer attraction

and profitability. After undertaking an idea as an opportunity for the business, entrepreneurs

has to take steps to shape the opportunity. For this the needs and objectives of the business

concern have to be analyzed. The cost effectiveness of particular idea comparing with its

alternatives also has to be considered. The selection criteria for an opportunity must be in

terms of major benefits, market possibility and potential business strengths supplied by each

opportunity. (Chapter 5: The Opportunity, p.3). (Chapter 5: The Opportunity, p.2). For

shaping an idea into an opportunity, a thorough research on the market characteristics has o

be carried out by the entrepreneurs. Analysis of competitors will provide an overview about

the potential strength and competency of the firm with regard to its competitors. (Chapter 4:

Shaping your Opportunity, The opportunity, Creating shaping, recognizing, Seizing, p.139).

How Can the Entrepreneurs Use the Business Plan Process to Identify the Best Team

Members, Director and Value Added Investors?

A business plan is the written description of the future of a business. It is a tool for

entrepreneurs to realise their business goals. Entrepreneurs can use the business plan for

coordinating the human resource personnel towards the business goals. Managers can be

directed properly through well prepared business plans. Investment seeking entrepreneurs can

use the business plan for transmission of their vision to potential investors. Potential investors

can be attracted to the business with proper business plan. “A Business Plan is the

foundation, or rather a springboard, towards the establishment and growth of a new business,

particularly in the later stages of growth. A business plan is an essential tool for companies

raising capital.” (The Importance of a Business Plan. 2008).

A Business plan is the guideline for managing the business in profitable ways. The business

plan should explore business goals and strategies to all persons engaged in the business

operations and the ways for achieving them. This will provide competitive strength for the

firm. (An Introduction To Business Plans. 2009). At the time of selection process of staff

personnel, business plan will act as a basis for setting up of selection criteria. Thus best team

members suitable to the business objectives can be selected. It explains the purpose of the

organization. By establishing vision in the business plan it can persuade others to contribute

for achieving the vision. Business plan can be used as yardstick for measuring the operational

performance of employees and managers.

Real life examples

There are many examples of success storied that started from and idea which became an

opportunity and eventually a business success. Such corporations have now become

multinational companies. But the example given here is not very well known outside of Hong

Kong. It also shows that any person can succeed in the region and need not be born here. The

founder of the Lan Kwai Group is actually a German by the name of Allan Zeman. He had an

idea to start a western style restaurant in a relatively small street called Lan Kwai Fong (the

name adopted by his company as well). The ideas became a success and eventually he bought

the whole street which became a cultural hotspot for tourists and locals alike. His idea

developed into real estate and is now known in Hong Kong as Mr. Lan Kwai Fong. “Later, in

2004, Zeman became chairman of Ocean Park, an amusement park which is now out

performing and thriving against the struggling Hong Kong Disneyland.” (Cole 2008).

Week 3

Money is the Least Important Part of the Resource Equation

Even though finance is an important part of the business process and new venture creation,

there are other factors, that are equally or more important. The potential value of a business

unit can be analysed using the Timmons model

The Timmons Model

“The Timmons model of the entrepreneurship process provides a framework for identifying

and evaluating venture potential. It helps determine the viability of new business model and

emphasizes rigor in opportunity assessment.” (Minniti 2007, p.12).

Entrepreneur requires various resources such as human resources including top professionals,

finance, physical assets, and a business plan. Money is the least important part of the resource

equation because starting of a new business requires entrepreneur’s ability to take risks as

well as abilities to overcome all challenges towards objective of the business. Financial factor

comes only as the least important factor for the entrepreneur. “Mill (1984) suggested that

Risk taking is a key factor in distinguishing entrepreneurs from managers. It is believed that

entrepreneurs take greater degree of risk especially in areas where they have control or

competencies in realizing the profit.” (Che, Naresh and Li 2006, p.1).

Utilization of professionals is a crucial decision process. Entrepreneur needs to look into

whether the services of professionals and other important factors such as technical know-

how, expertise in the field etc. are essential or not. Alternative solution can be used without

appointing professionals which will help to reduce much cost and effort. “Competency is one

of most crucial factors to ensure the success of new business ventures.” (Che, Naresh and Li

2006, p.5).

Week 4

Difference between an entrepreneurial manager and an administrator?

Even though it may sound similar, the manager and entrepreneur are two different characters

and needs different skills and capabilities in each case.

Differences

The primary difference between an entrepreneur and administrator is with regard to risk

bearing and conflict management, both inside and outside the organisation. While an

entrepreneur manager has material stakes and investments in the business, an administrator is

staff personnel who delegates work to employees and supervises their performance.

“Entrepreneurs are always thinking of ways to make money for themselves and create a

successful business, while managers only consider working for others.” (McSnackins 2008,

p.4).

A manager is concerned with day–to-day activities of the business enterprise, and is

accountable for persons working under him. Thus, the main difference between

entrepreneurial managers is that there is need to assess what needs to be done for the

corporate, and the manager determines how this could be performed, or achieved. Thus the

main area would be policy making and procedural for entrepreneurial, while for

administrators, it would be practically executing them. The main areas in which there are

perceived differences between entrepreneurial managers and administrators could be seen in

terms of the following. An entrepreneur has to be competitively oriented while an

administrator had to be an expert in day to day administration.

The former should always look for opportunities, whereas as for an administrator, this will be

considered to be a quality rather than a necessity. An entrepreneur is an investor and

employer while an administrator is an employee. An administrator is only responsible for the

area in which he controls whereas an entrepreneur has to have full control and responsibility

of the entire organization. It is seen that ethical values also play an important role in

entrepreneurship and sometimes short term gains have to be foregone for long term profits

and objectives. “What is ethical is not always obvious; rather situations involving ethical

issues are often ambiguous.” (Timmons and Spinelli, p. 326). However, administrators are

not under such kind of pressures or stresses, and only needs to perform assigned tasks

determined by the management.

Real life examples

A job opening (in Hong Kong) for an administrator describes the responsibilities (or duties)

for that post. They include general accounting duties and charge of general office

administration. (Japanese Speaking Accountant and Admin. 2008). The person also has to

have three years experience in the above mentioned duties. This is in agreement with what

has been said above. Entrepreneurial characteristics are common everywhere whether it is in

Hong Kong or any other part of the world. The case of Mr Thomas Tso, is an ideal example

of a businessman who had ideas, saw an opportunity, and was willing to take the risk. “One

of the keys to business success for Thomas Tso is to never look back. When he arrived in

Canada from Hong Kong in June of 1990 he had a business plan. There were challenges

ahead, but Mr. Tso was determined to succeed. As a result, he runs a successful automobile

sales and service dealership with plans for significant expansion.” (Tso).

Employee Motivation and reward

Employee motivation can be defined as the “the level of energy, commitment, and creativity

that a company’s workers bring to their jobs.” (Legal Definition: Employee Motivation Law

and Legal Definition. 2009). In order to maintain and increase the above factors, the

employee will have to be motivated and rewarded. The first reaction about what motivates an

employee would be that it is the monetary compensation received in exchange of work

performed. Many theories and studies have proved that monetary compensation is only one of

the factors that motivate employees. According to the book ‘Employee Reward’, the

following factors will have to be taken into consideration when trying to motivate and reward

employees. They include satisfaction of individual (employee) needs, specific and

challenging goals to work for, and the individual expectations of reward by the employee.

Other important factors are fairness, equity, and consistency. “Motivation strategies should

incorporate all the elements referred to above.” (Armstrong 2002, p.66).

The different theories and studies on motivation is testimony to this fact. They include

“Douglas McGregor (theory y), Frederick Herzberg (two factor motivation hygiene theory,)

Abraham Maslow (theory z, hierarchy of needs), Elton Mayo (Hawthorne Experiments) Chris

Argyris Rensis Likert and David McClelland (achievement motivation).” (Employee

Motivation: Theory and Practice. 2008).

Motivation can be extrinsic (tangible) and intrinsic (intangible).

Motivation is a challenging task. Setting a reward system is equally challenging and efforts to

make it perfect by providing proper job descriptions, setting up performance standards and

benchmarks, proper monitoring and periodic reviews and changes (to the reward system)

when needed is required.

Recruiting and retaining of employees

It is often said that employees are the most important assets of an organization. It is the

quality and ability of the employee, along with the capability and leadership shown by the top

management of the company that ultimately results in its growth and success. The employee

factor is especially true in the case of a new or start-up business. The employees, in close

association with the management have to play a crucial role to attracting, retaining and

growing its customer base. The top management of the company has to play an extremely

crucial role at this juncture of entry. They have the huge responsibility of recruiting the

senior, middle, lower level managers, supervisors and entry level employees of the firm.

They can resort to many established and accepted ways of doing this. The most common

ways are advertising in the print and visual media, taking employees from other companies,

using networking or availing the services of a professional staffing agency. In the case of

senior level management it would be ideal to use networking contacts established from

sources like friends, business associates, auditors, venture capitalists, and other associates. An

advantage is that the costs involved in paying fees of a staffing agency or paying for

advertising space can be saved. Advertising for jobs is useful for attracting a large number of

applicants and it can benefit the company by having a large pool of talent to select from.

(Recruitment Methods. 2002).

Advertising can be done in classifieds and trade journals which will less costly and more

effective. But this form of attracting talent can be quite expensive and wasteful. Cost of

advertising will depend on the media and the publication in which the advertisement is given.

It can be wasteful because the ad might not be visible or it might attract the wrong types of

potential employees. Another effective but costly option would be to use the services of a

professional staffing agency. The recruitment process involves sending interview dates,

preliminary interview, short-listing, second and final interview and sending letter of

acceptance. A contract along with a job description will have to be prepared for signing.

Real life examples

Intel is a very well known, respected and probably the largest processor manufacturer in the

world. The Hong Kong division has implemented a lot of employee benefits to motivate and

retain their employees. According to the company website, “Intel’s benefits plans are

designed to keep employees—our most important asset—healthy and productive. Our

benefits are generous and personalized, in many cases letting employees choose the options

that are right for themselves and their family.” (Our Greatest Investment is Our People: Hong

Kong). They include medical benefits, maternity benefits, pension programs, life and accident

insurance, paid leave, professional counseling for employees and their dependents etc.

Week 5

This section deals with the actual creation of a new venture and includes topics like due

diligence and funding of an enterprise.

Due diligence

Diligence can be defined as “conscientiousness in paying proper attention to a task; giving

the degree of care required in a given situation.” (Diligence (noun). The word due is added to

reinforce the amount of care that should be taken while starting a new venture. “The

entrepreneur, as earliest investor, should pursue due diligence on their idea early and often.

This due diligence precedes the decision to invest more time and money in their venture and

involves attempting to identify and resolve the most critical uncertainties (unknowns)

surrounding the new venture.” (Due Diligence).

They include factors like whether the project will work out, whether the entrepreneur can

manage it, whether there will be a market for the products, and whether the team is capable.

Three components for the basis of a new venture and several questions should be raised and

answered for each of the components. The components are the market, the technology and the

new venture (business).

Venture evaluation

It is not surprising that potential customers will conduct an evaluation process before

investing in the business. “A VC’s decision to invest in a specific venture is more than an

evaluation of a given venture’s business model; it also takes into account the NVT members

and numerous other criteria.” (Busenitz, Fiet and Moesel 2005).

VC stands for venture capitalists and NVT stands for new venture team. A study about

venture evaluation processes “confirms that relatively consistent evaluation criteria are

applied across the industry and corroborates previous models which suggest that the venture

capitalist’s decision-making consists of several stages.” (Boocock and Woods, 1997).

The criteria include factors like level of innovation, need (demand) for the product and value

to the customer, the profit margin of the product, production capability, product life cycle,

and the level of capital needed to satisfy the above criteria. The most important criteria

probably will be the perception of the investors in the ability of the entrepreneur in

successfully developing the business.

Sources of finance for the new venture

There are many ways in which a new venture can be funded. They include, debt and equity

financing, venture capital funding, funds from friends and relatives, and angel investors. In

the paper related to the week (submitted earlier as a part of weekly assignments) the choice of

funding was a balance between debt and equity funding. However, for the purpose of this

study, it is proposed to confine to mezzanine financing requirement for software industry that

deals high end customized software solutions on a global level.

This option is believed to provide access to large equity base that could sustain the company

in future years and also provide impetus to further investment proposals in future for

demanding software business needs and future diversification plans

Pros and cons of equity funding

The main advantages, or benefits of equity funding are as follows. There is non dependence

on loan or debt capital that is more risky in terms of mandatory interest payments and other

costs. This is because “as debt, the interest is payable on regular basis and the payment must

be repaid, if not converted into equity. “ (Timmons and Spinelli 2007, p. 425).

Dividend payments to shareholders would be at the discretion of the Board of Directors and,

in the event of deferred payments, could be a source of corporate savings for future use. A

broader and diversified capital base is ensured, providing motility and spread to fund

movements. The public image of the company is build, especially in a competitive market,

and third parties have greater confidence in dealing with them. There are certain

disadvantages also. There is greater degree of legal and financial accountability is

forthcoming in public limited companies. Strict Companies Registration Office compliances

and tighter regulatory framework would be in force. This could prove very cumbersome for

newly started companies with little professional experience or expertise in these areas of

public accountability.

Real Life examples

The concept of due diligence was practiced in the case of a new start-up dotcom company

called HarQen LLC. In this case due diligence was taken by one of the cofounders Lauren

Flanagan, as well as venture capitalists. Both of them found the venture very promising after

inspection and agreed to fund the venture. “That due diligence got Flanagan interested in the

technology. She told the company she was interested in investing if it would agree to move

beyond comedy.” (Gallagher 2008).

Week 6

Franchising

Franchising is one of the most sought after ways of doing business in the world today. It has

become so popular that this concept is being tried out in many avenues of business. The most

crucial component in franchising is the service delivery system which practically forms the

backbone of the concept.

Service delivery system in franchising: According to Francorp, a leading franchise consulting

and development firm, “the key is that you start with an exceptionally sound baseline service

delivery system.” (Conner 2008).

There is more literature written about the importance of an SDS. According to the book

‘Franchising’, an SDS is the fundamental means by which the customer satisfaction in a

franchising business is assured and also created a competitive advantage for the franchisees.

“Every franchise has a well defined SDS, however overt or transparent it may seem to an

outside observer.” (Spinelli, Rosenberg and Birley 2004, p.20). A well laid our service

delivery system has the following advantages. It “Encapsulates the intellectual knowledge of

the franchise as a business asset. Written instructions which add value to a business process

are leased to third parties to generate a profit.” (Preparing the Franchise

Package: Understanding the Business System, p.6).

Evaluation of an SDS

The importance of the SDS has been established and now the review of a sound system is

being done here. This can be done on the basis of procedures followed in the evaluation of a

general service delivery system and its quality. This will be done on the basis of a study

conducted on the effectiveness of fast food franchise outlets in the USA and Korea. The study

included the following variables commonly referred to as SERVQUAL, which is a common

yardstick to measure service quality. The variables are tangibleness, reliability,

responsiveness, assurance, and empathy. An SDS should assure that tangible factors like

“physical facilities, equipment, personnel, and communication materials.” (Chang, Lim and

Kim, p.1230).

Reliability of tasks and operations should be there to ensure quality. Responsiveness or the

willingness of the staff to be of service to customers and to meet their requirements is another

important factor. Employee should be made knowledgeable, courteous and should be able to

impart a feeling of trust and confidence in customers. Also an element of empathy rather than

sympathy should be taught to the employees in dealing with customers. The above mentioned

study also adds that these factors were not adequate in fully evaluating the service delivery

systems and added the following components to the study. They include sanitation (hygiene),

location of the franchise, the parking facilities available, the quality of the service (in this

case food), the environment in which the franchisee is situated and the image or perception of

customers about the franchising company. All the elements if properly ensured can give a

high evaluation rating to a service delivery system in any franchise business.

Real life examples

Franchising is a concept that is gaining in popularity in the region. But a problem that occurs

to international franchisors is the difference in culture, beliefs, and work/management

practices in an alien country. The service delivery system may have to be adjusted to suit the

above mentioned factors. “For the franchisor, the problem of incomplete information

regarding their franchisee-agent’s behaviour is aggravated by this decentralised service

delivery system whose geographical scope extends beyond national boundaries.” (Distance

Management). The above sentence was taken from a study on franchising success by

international franchisors in East Asia. The study claims that companies with well laid out and

adaptable service delivery systems have managed to find success in Areas like Hong Kong

and Singapore. Examples of successful franchisors include McDonalds’, Burgher King and

Kentucky Fried Chicken.

Week 7

The harvest goal

The term has an agricultural connotation because of the word harvest. In fact the concept is

similar to the activity done by a farmer. Like the latter, the entrepreneur also nourishes his

business by putting in money, effort, and risk in order to create a profitable operation. This is

like the farmer who puts in seeds, fertilizers, water, pesticides, and effort in order to harvest

his crops. In business harvest goal hence refers to exiting the well-built business (an exit

strategy) at a huge profit in order to find capital for new ventures, to retire, to do philanthropy

or for any other worthwhile goal. A harvest goal can be summed up by the following

sentence. “The professional entrepreneurs and investors know that harvesting an

entrepreneurial venture is the approach taken by owners and investors to realize after-tax cash

flows on their investment. It defines how they will extract some or all of the economic values

from their investment.” (Price 2002, p.212).

This denotes that it is possible and even accepted that an entrepreneur can start a business

with and exit strategy in mind as the first option itself and not when the business is seemingly

unsuccessful or difficult to manage.

Harvest goal options

A harvest goal can be achieved through many ways and the important ones are given below.

One option is the employee stock ownership plan (ESOP). Another option would be the

management buyout, whereby the existing top management or partners will buy out the

entrepreneur’s share. Mergers and acquisition is also another method to realize the harvest

goal. Strategic alliances and an outright sale to interested parties can also be considered

harvest goal options. By offering shares to the public thorough a IPO can also be pursued

which will result in the shares of the entrepreneur sold of completely or becoming a minority

shareholder in the company. The company can then be handed over to a professionally

formed board of directors with the former owner playing a small part like the chairman of the

board. The day to day affairs will be handled by the CEO and the board of directors. (Harvest

Options. 2004).

The founder of Parenting Magazine was a person called Robin Wolaner, Gary and George

Muller who started and made successful a company called Securities Online, Ewing Marion

Kauffman started the successful pharmaceutical company called Marion Labs are all

excellent examples of entrepreneurs who harvested their start-up ventures for various reasons.

These reasons include, retirement, philanthropy, starting other new ventures

Week 8

Analysis of a family business using the Mindsets and Methods Enterprising Model

It can be said that many of the large corporations of today have been started in a small way

by individuals and their families. Due to hard work and vision, they have now grown to the

status and size that one sees today. There are still many family owned firms that are

profitable, and still classified as small and medium enterprises (SME). Many of them remain

small or medium either because their owners choose to remain as such or due to a plethora of

problems that plague such units. There is a saying that the father started the business, the son

became rich, and the grandson ended up being poor. There are several reasons for this and

includes bringing personal emotions into business, informality, tunnel vision, confusion in

roles, favouritism, nepotism, problems in succession, problems in communication, etc. (20

Challenges Faced by a Family Owned Business. 2007). Even though an exaggeration in most

cases, there some truth in this saying. This section is an attempt to understand a typical family

run unit and the circumstances by which they remain as such. This will be done through a

review of literature (briefly) and mainly through an actual interview of a business family in

Hong Kong. The family in question runs a successful furnishing company in Hong Kong. The

owner, his two sons and nephews are the main persons involved in running the show. The

owner has a soft corner for his nephews. The latter are not very smart even though they are

honest. One of the sons want to expand the business but lack of enthusiasm in his father and

cousins frustrates him.

Solution using the mindsets and methods enterprising model

The most important step is to create communication through dialogue without going into

arguments. It is difficult to have effective business communication between family members.

The initiative should be taken by the son who holds the MBA degree since he is technically

sound with regard to areas like HRM. He should either convince them or remove them from

the scene, even at the cost of family displeasure. The issue of the business and its employees

is more important at this juncture. Moreover the nephews might come around once a strong

threat is voiced from their uncle. Timing is of essence and the sons want to start

diversification immediately while the father is more complacent about it. Both parties should

adjust their comfort zones and come to a mutual time schedule. Creativity should be

encouraged in the dialogue. Many pleasantly surprising suggestions and ideas may come up

even from the father and the nephews (if they come around). Sixthly, a passion for the

business should be developed among all the family members.

Figure 2. Acceleration.

Practical applications of the above module

Each section in our modules required a practical application with regard to what has been

learnt in the module. This is a brief recap of the business plans, market strategy, funding

options and other aspects with regard to the module in relation to an existing organization. As

an owner and managing director of a real organization, my focus was on the Thai Lay

Fashion Company Ltd and the new venture that is planned in the UK namely, Thai Lay

garments.

With regard to a new venture like the concept of a retail unit in the UK, the following aspects

have to be mentioned here. The first part relates to the Changing Business Environment with

regard to the Marketing Plan for the Thai-Lay company. In such a situation any company will

have to focus on issues like Cost leadership marketing strategy, Product Differentiation

strategy, Focus strategy, Pricing strategy, Promotional strategies, Product distribution,

Human resources strategy, Financing strategy, and growth plans. In the individual module

papers, I had prepared a detailed plan for equity financing and funding and hence not

elaborated here. We also have well laid out plans for employee recruitment, retention and

rewards. The concept of having well laid out job descriptions will now be seriously looked

into also. The interviewing of a business family was a new experience for me and gave me

insight and knowledge of potential problems (and solutions) that exist in small and medium

family businesses.

Normal housekeeping for the week

The last week of this module was as useful as the rest of the week plans. It was more of a

recap of what has been learnt in the module rather than explaining the benefits that I got from

a particular weekly session. On the whole, this module was and excellent one both personally

and as an entrepreneur. As for this particular final week, my tutors were as helpful as usual. If

ever there was an issue, the fault was mine and not due to any other persons. I have been able

to attend STUDENT TO INSERT ACTUAL NUMBER number of classes out of the total

required. On the whole, the module has been exceptionally useful. I have been able to

strengthen my existing knowledge about certain chapters like financing while new concepts

like franchising (service delivery system), harvest goal, mindset and methods model etc have

been leant. This course module will definitely help in my life and career as an entrepreneur. I

can also say that in case of starting of a new venture, I will be more efficient and will plan my

endeavour with due diligence and care.

Conclusion

The module on new venture start-ups has been concluded in an eventful eight weeks of

intense study. Diverse topics have been covered in the module. They include risks that a new

entrepreneur will face during the start-up and eventual building up and growth of the

enterprise. Diverse funding options available and the ideal choice in a given situation was

also studied. In the case of my company, the choice at this stage would be debt and equity

financing with additional funds (if required) from friends and personal savings. Recruitment,

reward, and retention of employees is an important factor in the success of any venture and

this is especially true in the case of start-ups. Entrepreneurs will have to make decisions that

may have far reaching effect in the business, and the Normative method to assist in this task

has also been studied. The mindset and methodology model for assessing family owned

businesses was also very useful and informative. The concept of franchising (and service

delivery systems), angel investors, difference between an entrepreneur and administrator etc

were relatively new topics, but were extremely important in understanding the many aspects

of running business and starting new ventures. In the case of the retail shop planned, these

can be implemented if needed,

Practically every aspect that is required in the case of a new venture start-up was covered in

the module. It can be said that any person interested in starting a new venture as well as

developing his existing one can benefit from the contents given in the module.