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Business Growth:The entrepreneurs experience
The process of enhancing some measure of an enterprise's success. Company growth can be carried out either by enhancing the top range or income of the company with greater income or service income, or by increasing in general or productivity of the function by reducing costs.
Studying outcomes
By the end of this session, you should be able to:Understand the incorporated characteristics of
company development and how it is measured
Discuss and look at the use of designs of the little company development process
Discuss some of the standards that impinge on company growth
Key Questions
• How can we tell whether a company is growing?
• Do companies need to grow?• What impacts the development of
organisations?• How can we design development and is it
useful?
How can we tell a company is growing?
Here are symptoms that your company continues to grow too quickly, and things might be getting uncontrolled. These are some of the most typical issues associated with start-ups, and it is important to know these symptoms.• Your company costs over-shadow your revenues• There’s an increasing variety of client complaints• Your workers are over-worked, and unhappy• YOU are over-worked and unhappy• Your providers and other providers can’t keep up• Your facilities, techniques, and procedure are redundant/can’t keep up• Your focus changes from top quality to quantity• You start dropping customers
Business growthFinancial Growth
Strategic Growth
Structural Growth Organisational Growth
Resources Performance
Asset accumulation Direction
Use of assetsNet assets Number of people
New productsStrategic alliances
Profitability, sales turnover
What does a common development bend look like for a business?
Time
A Gazelle Company: Facebook
Distribution of firms by size
Large250+
Medium50-249
Small 0- 49
Micro 0-9
0.1%
0.6%
99.3%
95.4%
Source: stats berr, 2008
Enterprise survival rates
Percentage of firms still trading after
US UKVat Reg’d
1 year 96
2 years 66 803 years 654 years 50 545 years 45
6 years + 40
Birches: Mice, Elephants and Gazelles• Mice
– Small, insecure, diligent, little market impact power, quick to change route when necessary, very few desire to develop, sustain their profitability
Elephants– Large, control respect, cannot change direction quickly, is going to
impact the industry and conditions, likely to be acquiring in size– Gazelles– Development focused with above regular productivity, search for
growth rather than management, eventually become huge companies, nimble, “at least 20% growth a year for 4 years”
Start ups: A taxonomy• Lifestyle firms: • privately possessed and assistance owners• modest growth• Typically small company • A base company• Centered on analysis and development• Creates new industry or changes whole sector• A great prospective venture• Rapid growth, • Innovative products/services in a huge market• Large investments
Growth aspirations and performance
‘Trundlers’
‘Gazelles’
‘Triers’
‘Supergrowth’firms
passiveshrinkers
‘Livingdead’
negativegrowth no growth growth
aspirations,some growth
high growth
deliberateshrinkers
Mature firms
‘Flyers’
eg. Topclass ties
eg. Used cars
eg.Cycle world
e.g. Chocolat Hotel,Facebook
‘Life style firms’
• A Social Enterprise• Uses ‘engaged ethics’ buying cocoa beans
from multiple growers• The company’s sales have soared 226% a year
from an annualised £533,000 in 2005 to £18.4m in 2008.
Can we design growth?
Lifestyle Pattern Models
Fundamentals of Lifestyle Cycles These concepts recommend that little company
development classified by a number of foreseeable, typical, distinct and reliable
‘stages’ or ‘phases’sequential in characteristics and happen as a ordered
development not quickly reversedtend to be ‘metamorphosis’ designs (d’Amboise and
Muldowney, 1988)‘Crises’ are an important function – times of relatively
constant development distributed with times of more fast, discontinuous change
The small business life cycle
Size
Age of businessEvolution Crisis
Inception Survival Growth Expansion Maturity Stage 1 Stage 2 Stage 3 Stage 4 Stage 5
What are crises?
• growing pains’ (Steinmetz, 1969)• ‘developmental problems’ (Kazanjian, 1988)• ‘developmental ‘hurdles’ (Parks, 1977)• Agreement that different issues during
different volume of a development procedure – following (Dodge and Robbins, 1992)
• Certain issues more well-known at certain periods and following design to crises
‘Greiner Design : Evolutions and radical changes as organizations grow
1. Crisis ofLeadership
2. Crisis of Autonomy
3. Crisis ofControl
4. Crisis ofRed Tape
5. Crisis of?
1. Growth through
Creativity
2. GrowththroughDirection
3. Growththrough
Delegation
4. Growththrough
Co-ordination
5. Growththrough
Collaboration
Size of Firm
Age of Firm
Churchill and Lewis model
Modifying part of the entrepreneurHIGH
LOW
1Conception/
Existence
2Survival
3Growth/Success
4Expansion/
Takeoff
5Maturity
Owner’s ability to do
People, planningand systems
Owner’s abilityto delegate
(Adapted from: Churchill and Lewis, 1983)
Greiner v Churchill & Lewis
• What resemblances and variations can you see in the two models?
• Think about problems like linearity: is there any opportunity for in reverse actions as companies actually reduce and grow? Can actions be overlooked, e.g. dot.coms can develop extremely quickly?
• What about problems problems such as a recession in the market? What about companies that just never develop, or develop very gradually over an extended period?
Critique of designs of growth• “Limited effectiveness for the research of growth control since
they are designed on the deterministic supposition that all companies develop linearly through a foreseeable sequence of preordained stages” (Merz et al, 1994).
• Scientific research verified that growth levels not distinct and extremely specific
• Stages are liquid and non-sequential, with developing problems often the actual between different stages
• ‘Grow or fail’ speculation criticised. • Small companies often achieve a level in their growth and can
stay in one growth level for extended period of time
What factors impact small company growth?
•Accurate and complete application documentation.•Professional and credible financial statements. •Working relationship. • A strong business plan for capital infusion
Impacts on Growth
Entrepreneur Firm
Strategy
Business Environment Storey, 1994
Impacts on Growth
25
AgeBehaviourGenderReligionFamilyExperience
Role Models
Support/ training
Economic
TechnicalPolitical/ legal
Religion
History
Industry
Social
Digital
TechnologyCycles
Political economy
Education systemEmployment
levels
ModelsTaxation
Interest rates
Internet
Sustainability
Access to finance
Regulation
Attitude to risk
The End of the Cycle:Business Closure
• Organized quit v forced• Part of organic pattern of ‘business churn’• Closure routes• sold on 33% approx• Insolvent 20% approximately.• Reopened • closed down• (Source: SBRC, 2002)• Entrepreneurial studying – ongoing as an company
owner, desired career or retired• Serial company owners, profile entrepreneurs
Conclusions
• Variety of actions of development – healthy score card needed
• No one single concept will effectively explain the development styles in small companies (Smallbone, in Jackson and Jones-Evans, 2006)
• Successful business owners need to be remarkable students and convenient to survive
Key Sources and Further Reading• Jackson and Jones-Evans (2006) ‘Enterprise and Little Business’,
Section 6• Churchill and Lewis (1983), ‘The 5 levels of small business growth’,
Havard Company Review• Greiner, Lewis E., (1972), ‘Evolution and Trend as Companies Grow’,
Stanford Company Review• The Walls Road Publication, (March 2008) ‘Facebook CEO Looks for
Help as Website Develops Up’ http://online.wsj.com/public/article/SB120465155439210627.html?mod=blog
• Storey, D (1994), ‘Understanding the Little Company Sector’, Worldwide Thomson Company Media, London
• Wired (09/06/07), How Indicate Zuckerberg Converted Facebook or myspace Into the Web's Most popular System http://www.wired.com/techbiz/startups/news/2007/09/ff_facebook?currentPage=2
Appendices
Churchill and Lewis
Churchill, N.C & Lewis, V.L. (1983)