CHAPTER 18
Planning for Change
SUMMARY AND AUTHOR’S NOTE
An important part of planning the new venture is planning for change and managing potential
risks. Change is one of the certainties of business life, but unfortunately, a good many
entrepreneurs don’t take the time to prepare proactively for it. Knowing how their venture might
respond to typical changes in the industry and the economy in general will help entrepreneurs set
up organizations that are more flexible and capable of adapting to change. This chapter deals
with how to respond to major changes or threats to the business, decisions that should be made
before these events occur.
CHAPTER OBJECTIVES
After reading this chapter, students will be able to:
• Discuss the role of risk management in the entrepreneur’s growth planning.
• Explain the various risks that affect startups during early growth.
CHAPTER OUTLINE
OPENING CASE: When It’s Time to Step Down
I. Preparing for Contingencies: Risk Management—the importance of planning for
contingencies
• Figure 18.1—Managing Risk in a New Venture
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a. Identifying Potential Risks—responding to risk with process improvement and
buffer strategies
i. Supply Chain Risks
probability of risk and calculating risk of loss
ENTREPRENEURSHIP: MAKING MEANING—The Social Venture Network
II. Leadership Succession—the succession planning process
a. Change of Ownership in Small Enterprises—four-step plan for succession planning
b. Succession Planning in Family–Owned Businesses—succession issues in family
businesses
III. Planning for Harvest and Exit—the importance of exit planning
a. Selling the Business—ways to prepare to sell
RELEVANT CASE STUDIES
Case 4 The Crowne Inn
Case 9 The Case of Google, Inc.
ANSWERS TO QUESTIONS ON KEY ISSUES
1. Contingency planning is not foolproof. How can an entrepreneur ensure that the
contingency plans he or she has devised will keep the business on the path to its goals?
By forcing entrepreneurs to consider multiple outcomes and possibilities, contingency
2. How can the entrepreneur prepare for potential product liability litigation, both to minimize
the chance that such lawsuits will be brought and to give the company the best chance of
prevailing against a product liability claim?
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The entrepreneur can establish a formal safety panel that includes people from all the major
3. How can an entrepreneur prepare for a potential decline in sales?
4. Suppose an entrepreneur has built a successful business over several years and now has the
opportunity to start another business compatible with the current one. How can the
entrepreneur leave the original business yet stay involved in it?
The entrepreneur can sell some of his or her stock in the company and retain a position on
5. If an entrepreneur’s business finds itself in trouble, what are the options available to the
entrepreneur to attempt to remedy the situation?
The entrepreneur can call in a turn-around specialist who can find the causes of the
SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP
1. Interview an entrepreneur in an industry of your choice to learn what his or her harvest
strategy is. What is this entrepreneur doing to ensure that the harvest strategy will be
achieved?
Students should not be surprised if the entrepreneurs they interview do not have harvest
2. Interview a turnaround consultant about some ways to recognize problems that could lead
to business failure. From this interview, devise a list of do’s and don’ts that will help an
entrepreneur avoid business failure.
Students should compile a joint list of key indicators of potential problems. This will be an
invaluable resource to them when they start their own businesses.
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SUPPLEMENTARY LECTURE MATERIAL
Managing for Change
Some say that turbulent times will probably be a way of life for the foreseeable future. When the
pundits can’t even agree on where the economy is going and what the state of the capital markets
will be in the near future, what should an entrepreneur do to plan for change?
• Don’t expect a lot of capital to be available any time soon. Great and proven concepts
how they can make money without having to go to professional money sources.
• Don’t rely on any single economic indicator. Furthermore, don’t get caught up in the
• Make sure the company’s cash flow can more than support its debt load. In a volatile
• Be cautious about potential buyers for your company. In volatile economies, cash is
• If you’re in the global market, stay there. But be cautious about protecting your
receivables with insurance. There are many great opportunities in Asia, where the economy
• Invest in R&D. Do it not just to generate new products but also to get closer to customers
• Invest in internal information systems to better manage the business processes.