Module 13 ENTR-27056-003
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This 5 page Class Notes was uploaded by Megan Angelo on Tuesday April 5, 2016. The Class Notes belongs to ENTR-27056-003 at Kent State University taught by Kipp A. Krukowski (P) in Spring 2016. Since its upload, it has received 23 views. For similar materials see Intro to Entrepreneurship in Entrepreneurship at Kent State University.
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Date Created: 04/05/16
Module 13 The Entrepreneurial Organization Organization: Understanding the Way the Business Works Organizational Structure • Represents the infrastructure, processes and systems by which the business will move from idea to reality. • Must start by understanding how information and materials will flow through the business. Need to know this in order to make the best choices about business location, number of employees and the technology needed. • After understand how information and materials will flow, the next step is to assign responsibility (to an individual or group) to manage each step of the information/material flow. Organization: Understanding the Way the Business Works After identifying the business processes that apply to your organization (i.e., On-line sales? Materials purchasing? Product assembly? Shipment of product? Off-site product installation?), design a flowchart that documents how information/material flows through the business and who is responsible for each step of this process. Mapping the business in this way leads to better decisions about • the number and type of people to hire • the amount and type of equipment to purchase • the best type of facility to complete all necessary tasks • the type of organizational structure to employ Finding the Appropriate Business Site – a Physical Location • Learn about financial incentives (Are there tax breaks and/or “free” resources available? Do these incentives/resources make it worthwhile to locate somewhere that might not otherwise be an ideal location?) • Learn about the local demographics (Identify trends and determine how these trends will affect your business) Finding the Appropriate Business Site Choosing a retail site • Consider the trade area (the area from which you expect to draw customers) • After the trade area is identified, consider the nature and character of your competition • Accessibility • Consider the ease of access by car or alternative means of transportation, parking and the length of time a customer must spend on foot……and the quality of that time…. Finding the Appropriate Business Site • Choosing a service/wholesale site • Pay for image only if you need to, i.e., if customers or certain key stakeholders will be visiting the site. • Choosing a manufacturing site • Less choices available due to zoning • Consider convenient access to suppliers • Consider the cost of labor • Consider access to transportation for your people and products • Consider the cost of utilities (rates can vary considerably) • Rent rather than buy (avoid buying the EPA issues prior manufacturers may have left behind) Alternatives to conventional facilities • Incubators • A controlled environment that improves the chances that a business will survive the start-up phase. (Feature amenities like below market rates for space, shared support employees) • Shared space • Locate your business within the facilities of a larger company. (Massage therapist rents a room inside a chiropractor office) • Mobile locations • Kiosks in malls and pushcarts on streets • Temporary Tenant Agreements • Until the landlord finds a permanent tenant, the landlord gets some rent for vacant space. Allows the entrepreneur to test concepts /sales approaches/different types of retail space on the cheap. The Virtual Enterprise • A virtual enterprise is a “business without walls” - an organization “in the cloud.” • It is usually a temporary network of independent companies, suppliers, customers—linked by information technology - to share skills and cost and gain access to one another’s markets. • The virtual enterprise’s goal is to deliver the highest-quality product at the lowest possible cost in a timely manner. • Usually focuses on one core competency (sales? Customer service? Product development?) And outsources the rest. • Is a network of strategic alliances? • Important to keep virtual employees and strategic partners linked via a pre-determined schedule of regular meetings, preferably face to face or, at least, video-conferenced. People: Organizing Start-up Human Resources • Hire the right people the first time (avoid uncomfortable firings, lawsuits, and unproductive employees) • Employees are usually one of the biggest expenses of a business • Know exactly what functions need to be performed (have a detailed job description) • Consider how best to perform the employee search (consider promoting from within; get referrals for potential new employees from existing, trusted employees and strategic partners) • Interviews (ask open-ended questions so the interviewees can express themselves…This will reveal a lot.) • Also, know what questions you may NOT legally ask; examples: “Are you married?” “Do you have children?” “What is your religious affiliation?) Managing Employee Risk • Risk management is a set of policies and their associated decision-making processes that reduce or eliminate risks associated with having employees. • One good way to reduce the risks associated with employees is to have an employee handbook • Expressly limits employees’ ability to make decisions or engage in activities that can cost you money or get you sued. • Wise to have employees sign a prepared document confirming that they have read and understand the employee handbook. • Be aware of the connotations associated with employee titles. (If you give someone the title “vice president,” outsiders will generally (and correctly!) assume that person has a least some decision-making authority.) Planning for Ownership and Compensation The Major Issues: • How much of the company to sell to potential stockholders and stockholder/employees? • How much to pay key managers? Compensating with Stock Remember that: • An investor does not have to be an equal partner • Not all stock has to have voting rights (ex: preferred) • Try to hire talent rather than give away ownership • Use cash to pay bonuses, rather than stock Alternatives to Equity Incentives • Deferred Compensation Plans • Awards based on performance are specified; employee does not pay tax on award until it is actually paid out at a later date. • Bonus Plans • Should be based on measurable objectives (ex.: increase in sales) • Capital Appreciation Rights • “Phantom stock” with no voting rights: rewards employee only when the value of the business is increased • Profit-sharing Plans • Subject to ERISA rules for employee retirement plans (which means they can be expensive for an employer to administer); must include ALL employees without regard to individual contribution to profit or performance; employer not obligated to contribute. Leading People: Common Entrepreneur Leadership Traps • Isolating him or herself from the rest of the start-up team by failing to keep the lines of communication open. • Always having the one “right” answer instead of looking for the best solution. • Keeping people on board who are not up to the needs of the company. • Taking on too much too soon. • Setting unrealistic expectations, usually based on inadequate information. • Not building a support system