1. Chapter 19 Managing growth and harvesting

2. Learning Outcomes On completion of this chapter you should be able to: Distinguish between the various life cycles of a high growth venture Identify the characteristics of a high-growth venture. Identify and discuss the factors influencing entrepreneurial growth: o Management o Entrepreneurial strategy o Entrepreneurial objectives o Market o Money o Leading practices of high growth ventures Discuss harvesting as a strategic option by means of: o Setting up for harvesting o Identifying the advantages of having a harvesting strategy o Distinguishing between different harvesting options available to entrepreneurs o What happens after harvesting

3. Introduction Achieving sustainable growth remains one of the great mystery processes in organisational planning, yet it plays a vital part in the existence of any organisation The entrepreneur needs to create a harvesting goal and keep to it throughout the venture life cycle – it will assist in creating real value to be able to sell the business at a later stage

4. Business life cycles Stage 1: Seed or concept – the concept or invention stage, idea generation and recognition takes place – entrepreneur decide whether to remain small or grow into a large organisation Stage 2: Start-up – prototype developed, entrepreneurial team identified and assembled, business and marketing plans finalised, manufacturing established, sales of products and services initiated, and funding sought Stage 3: Product, service, and organizational development – achieve market penetration and expand initial sales, reaching break- even Stage 4: Production and market development – achieving volume production along with market penetration

5. Business life cycles Stage 5: Strategic planning and major financing: all systems are in full operation and the potential for a major success is beginning to be apparent. Stage 6: Rapid expansion: establishing formal management and organizational structures, the venture is cash provider and cash-flow management less critical Stage 7: Maturity and stability: strategic planning an integral part, competitors build strategies around the venture and new ventures could become a threat, market leadership is built on customer service and loyalty and not on cost leadership

6. Characteristics of high growth ventures They are managed by entrepreneurs that can be described as hardy, ambitious, goal-achieving dreamers They have entrepreneurial managers who have built an entrepreneurial team consisting of experts The entrepreneurs who have started a high-growth venture recognize their need for and dependence on certain outside players The business plan is like running the venture on paper, and the entrepreneur and entrepreneurial team take time to ensure that they are not wasting time and money.

7. Characteristics of high growth ventures Financing needs will change and business plans are adapted to reflect changing needs After the opportunity has been identified, the venture team assembled, and financing obtained, the entrepreneurial management of high growth ventures will accept the challenge of making all the pieces fit They take advantage of advanced knowledge and information that is more tightly and economically bundled Their products and (or) services incorporate high-technological know-how or information.

8. Factors influencing entrepreneurial growth Management Strategy Objectives Marketing Leading practices of high growth companies

9. Influence of Management Creating a business vision Management by objectives Delegating Careful expansion Hiring for the future Leading people and managing things Monitor and respond Managing the organisation culture

10. Entrepreneurial strategy Transform the customer experience Transform organisational offerings Redefine profit drivers Exploit industry shifts Enter new markets

11. Entrepreneurial objectives Establish and maintain a strong sense of purpose Understand the marketplace Build an effective growth planning system Develop customer-driven process Put power of technology to work Attract and keep the best employees See the future more clearly

12. Marketing Market development: segment and target their markets and employ direct selling combined with a secondary web-based strategy Geographical diversification: enter into new geographical areas and markets, especially beyond the local area.

13. Money – venture capital Types of funding offered: Seed capital: capital that is used for research and development of a concept, before commencement of the business. This can include funding to develop a prototype. Start-up funding: capital that is used to start the business Early stage growth funding: capital that is used for by an established business to grow the business to the next level.

14. Leading practices Marketing practices Financial practices Management practices Planning practices

15. Harvesting Final stage of entrepreneurial process Harvesting goal and crafting a strategy to achieve it are what separate successful entrepreneurs from the rest of the pack The mind-set of an entrepreneur going into business with the goal of later harvesting the business is totally different from that of a small business owner

16. Setting up a business for harvesting The workload demanded by a harvest-orientated venture versus one in a venture that cannot be harvested may be less and is probably no greater A business that’s geared towards harvesting could be less stressful The options seems to rise geometrically as investors, other entrepreneurs, banker, and the market place respond Having a harvesting goal is about creating a sustainable business that has real value.

17. Harvesting strategy guidelines Patience: building a successful company takes time frame of 3-5 years and as long as 7-10 years Realistic valuation: impatience is the enemy of an attractive harvest, then greed is its executioner – do not think business is worth more than it really is Outside advice: find an adviser that can help developing a harvesting plan with objectivity and without emotion

18. Harvesting options Capital cow Employee stock ownership plan Management buyout Outright sale Merger Acquisition Strategic alliance