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Entrepreneurship Module – Managing Entrepreneurial Ventures
ENTREPRENEURSHI
P
MODULE
MAN
AGING
ENTREPRENEURIAL
VENTURES
This module presents information to provide students with a foundational knowledge of
major entrepreneurial issues in today’s dynamic business environment. Entrepreneurs
engage in a variety of activities through their performance of the four managerial
functions of planning, organizing, leading, and controlling. This module examines the
importance of entrepreneurship and the activities and tasks that contribute to a
successful entrepreneurial venture.
What is Entrepreneurship?
A. Entrepreneurship is the process of starting new businesses, generally in response
to opportunities.
B. Entrepreneurial ventures are organizations that pursue opportunities, are
characterized by innovative practices, and have growth and profitability as their
main goals.
C. Small businesses are independent business having fewer than 500 employees that
don’t necessarily engage in any new or innovative practices and that have relatively
little impact on its industry.
D. A small business isn’t necessarily entrepreneurial because it’s small.
E. To be entrepreneurial means that the business is innovative and seeking out new
opportunities.
Who’s Starting Entrepreneurial Ventures?
A. With the unemployment rate so high, many individuals are starting their own
businesses.
B. Being an entrepreneur is not easy, only 44 percent of new businesses survive longer
than four years.
What Do Entrepreneurs Do?
A. Entrepreneurs create something, search for a change, respond to it, and exploit it.
B. Entrepreneurs must address four key steps as they begin and manage their
entrepreneurial ventures:
1. Explore the entrepreneurial context.
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2. Identify opportunities and possible competitive advantages.
3. Start the venture.
4. Manage the venture.
What Planning Do Entrepreneurs Need to Do?
A. The entrepreneur must put serious thought and consideration into the writing of a
business plan.
B. A written business plan can range from basic to thorough. The most basic type of
business plan would simply include:
a. An executive summary: mini-business plan that’s no longer than two pages.
b. A synopsis: an executive summary and a business proposal explaining why
the idea is relevant to potential investors.
c. A summary business plan: an executive summary and a page or so of
explanation of each of the key components of a business plan.
d. A full business plan: the traditional business plan.
e. An operational business plan: the most detailed; used by ventures already
operating with an existing strategy.
What’s In a Full Business Plan?
A. A good business plan covers six major areas:
1. Executive summary: summarizes the key points that the entrepreneur wants to
make about the proposed entrepreneurial venture.
2. Analysis of opportunity: includes (1) sizing up the market by describing the
demographics of the target market; (2) describing and evaluating industry trends;
and (3) identifying and evaluating competitors.
3. Analysis of the context: describes the broad external changes and trends taking
place in the economic, political-legal, technological, and global environments.
4. Description of the business: describes how the entrepreneurial venture is going to
be organized, launched, and managed.
5. Financial data and projections: should cover at least three years and contain
projected income statements, pro forma cash flow analysis (monthly for the first
year and quarterly for the next two), pro forma balance sheets, breakeven
analysis, and cost controls.
6. Supporting documentation: in this section, the entrepreneur should back up his or
her descriptions with charts, graphs, tables, photographs, or other visual tools.
What Issues are involved in Organizing an Entrepreneurial Venture?
A. Legal Forms of Organization.
1. In organizing a new business, the entrepreneur must first determine the form
of legal ownership for the venture. The two primary considerations in this
decision are taxes and legal liability.
2. These three basic ways to organize are sole proprietorship, partnership, and
corporation.
a. Sole proprietorship
b. General partnership
c. Limited liability partnership (LLP)
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d. C-corporation
e. S-corporation
f. Limited liability Company (LLC)
B. What Type of Organizational Structure Should Entrepreneurial Ventures Use?
1. As the business grows, the entrepreneur must hire employees to help in the
business. At this point, the entrepreneur must decide on the most appropriate
structural arrangement to effectively and efficiently carry out the
organization’s activities.
2. Organizational design choices are based on the six key elements of
organizational structure:
a. Work specialization
b. Departmentalization
c. Chain of command
d. Span of control
e. Amount of centralization-decentralization
f. Amount of formalization
C. Human Resource Management Issues in Entrepreneurial Ventures.
1. As an entrepreneurial venture grows, additional employees will need to be
hired to perform the increased workload.
2. Employee recruitment. An entrepreneur wants to ensure that the venture has
the people to do the required work. Recruiting new employees is one of the
biggest challenges that entrepreneurs face.
3. Employee retention. Getting competent and qualified people into the venture
is just the first step in effectively managing the human resources. An
entrepreneur wants to keep the people he or she has hired and trained.
What Issues Do Entrepreneurs Face in Leading an Entrepreneurial Venture?
A. What Type of Personality Do Entrepreneurs Have?
1. It has been difficult to identify specific personality traits that all entrepreneurs
share.
2. Evidence suggests an entrepreneur is likely to have a proactive personality: a
personality trait that describes individuals who are more prone to take actions
to influence their environments.
3. Studies have shown that entrepreneurs have greater risk propensity than do
managers. However, this propensity is moderated by the entrepreneur’s primary
goal.
B. How Can Entrepreneurs Motivate Employees?
1. Successful entrepreneurial ventures must be quick and nimble, ready to pursue
opportunities and go off in new directions.
2. Empowered employees can provide that flexibility and speed. When employees
are empowered, they often display stronger work motivation, better work
quality, higher job satisfaction, and lower turnover.
3. It’s hard for many entrepreneurs to empower employees because they have
devoted so much into their business – it’s a gradual process of building trust in
employees.
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4. Entrepreneurs can begin by using participative decision making in which
employees provide input into decisions.
C. How Can Entrepreneurs Be Leaders?
1. Leading the Venture: leadership combines the unpredictability of the future
with the gifts of individuals. The way an entrepreneur leads the venture should
be much like the jazz leader—drawing the best out of other individuals, even
given the unpredictability of the situation.
2. Leading Employee Work Teams: The three most common entrepreneurial teams
are: empowered teams (teams that have the authority to plan and implement
process improvements), self-directed teams (teams that are nearly autonomous
and responsible for many managerial activities), and cross-functional teams
(work teams composed of individuals from various specialties who work
together on various tasks).
What Controlling Issues Do Entrepreneurs Face?
A. How is Growth Managed?
1. Growth is a natural and desirable outcome for entrepreneurial ventures. It is what
distinguishes an entrepreneurial venture.
2. Entrepreneurial ventures pursue growth. Growing slowly can be successful, but
so can rapid growth.
3. Growing successfully doesn’t occur randomly or by luck. Successfully pursuing
growth totally requires an entrepreneur to manage all the challenges associated
with growing, which entails planning, organizing, and controlling for growth.
B. How Are Downturns Managed?
1. Recognizing Crisis Situations: Some signals of potential performance decline
include inadequate or negative cash flow, excess number of employees,
unnecessary and cumbersome administrative procedures, fear of conflict and
taking risks, tolerance of work incompetence, lack of a clear mission or goals, and
ineffective or poor communication within the organization.
2. It’s important to have an up-to-date plan for covering crises.
3. This plan should focus on providing specific details for controlling the most
fundamental and critical aspects of running the venture—cash flow, accounts
receivable, costs, and debt.
C. What Is Involved with Exiting the Venture?
1. Harvesting: capitalizing financially by exiting on the investment in the venture.
2. The issues involved with exiting the venture include choosing a proper business
valuation method and knowing what’s involved in the process of selling a
business.
3. Other factors to consider include being prepared, deciding who will sell the
business, considering the tax implications, screening potential buyers, and
deciding whether to tell employees before or after the sale.
D. Why Is It Important to Think about Managing Personal Challenges as an
Entrepreneur?
1. One of the most important things an entrepreneur can do is become a good time
manager.
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2. Another important thing an entrepreneur can do is seek professional advice where
business knowledge is needed.
3. It’s important to deal with conflicts as they arise—both workplace and family
conflicts.
4. To achieve a balance between work and personal life it is good to develop a
network of trusted friends and peers.
5. It is vital to recognize when your stress levels are too high.
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