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Entrepreneurship

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Entrepreneurship ­ MGT602
VU
Lesson 40
PREPARING FOR THE NEW
VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued....)
MOTIVATING AND LEADING THE TEAM
The entrepreneur will usually be a role model for any other employees.
Good work ethic will go a long way toward achieving financial and emotional success. During the early
stages employees need incentives to remain committed and loyal to the long run success of the new
venture.
It is important that the founder assume the role of leader to the management team and employees.
Leadership is also influencing and inspiring others in the organization to strive to meet the mission of the
venture. Below are some behaviors that can exhibit the leadership qualities necessary for the new venture.
Set an example with an ethical set of values for other managers and employees. Show respect and concern
for the personal well being of employees. Don't try to do everything yourself. Recognize the diversity of
employees and how they should be treated. Encourage and praise others in the organization when
deserved. Provide incentives and awards for quality work effort and new ideas. Recognize the importance
of employees having fun at their jobs. Be aware of the need for future strategic planning.
Communication with managers and employees is one of the most important leadership qualities.
FINANCIAL CONTROL
The entrepreneur will need some knowledge of how to provide appropriate controls to ensure that
projections and goals are met. Financial skills are needed for the entrepreneur to manage during early years.
The cash flow statement, income statement, and balance sheet are key areas needing careful management
and control. Some financial skills are necessary for the entrepreneur to manage the venture during the early
years.
Managing Cash Flow
An up-to-date assessment of cash position, such as a monthly cash flow statement, is needed. The cash
flow statement may show the actual amounts next to the budgeted amounts. It is useful for adjusting the
pro forma and indicating potential cash flow problems. A cash flow crisis can occur suddenly and
unexpectedly.
Cash flow analysis can also involve sensitivity analysis: for each monthly expected cash flow the
entrepreneur can use a +/-5% that would provide a pessimistic and optimistic cash estimate. For the very
new venture it may be necessary to prepare a daily cash sheet. Comparison of budgeted or expected cash
flows with actual cash flows can provide an assessment of potential cash needs and indicate possible
problems in the management of assets and control of costs.
Managing Assets
In addition to cash management, other items such as accounts receivable and inventory also need to be
controlled. Management of credit may include acceptance of credit cards or use of internal credit. Using
outside credit cards shifts the credit risk to the outside company but increases costs. Using internal credit
makes the firm responsible for collecting delinquent payments, and payment delays can create negative cash
flows. The entrepreneur will need to be sensitive to major changes in accounts receivable and should always
compare actual with budgeted amounts. Inventory is an expensive asset, and requires careful balance.
If inventory is low and the firm cannot meet demand, sales will be lost. Carrying excess inventory can be
costly. An inventory control system allows the company to monitor key figures, such as inventory turnover
and percentage of customer complaints. The entrepreneur will need to determine the value of inventory
and determine how it affects the cost of goods sold. Most firms use a FIFO (first-in, first-out) system since
it reflects truer inventory and cost values. There are good arguments for the use of LIFO (last-in, first-out)
in times of inflation. The decision to convert from a FIFO to a LIFO system is complex and requires
careful evaluation. It is necessary to decide if inventory is to be grouped into categories or to cost each item
individually. All inventories must be costed by searching through historical records.
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Entrepreneurship ­ MGT602
VU
An average inventory cost must be calculated. Conversion to LIFO can typically be beneficial if the
following conditions exist: Rising labor, materials, and other production costs are anticipated. The business
and inventory are growing. The business has some computer-assisted inventory control method capability.
The business is profitable. The entrepreneur must keep careful records of inventory using perpetual
inventory systems followed by a periodic physical count. Fixed assets have certain costs related to them,
such as depreciation. If the entrepreneur cannot afford to buy equipment or fixed assets, leasing could be
an alternative. Leasing may be a good alternative to buying depending on the terms of the lease and type of
asset. Leases for automobiles may be more expensive than a purchase. However, lease payments represent
an expense and can be used as a tax deduction. Leases are also valuable for equipment that becomes
obsolete quickly. The entrepreneur should consider all costs associated with a lease-or-buy decision as well
as the impact on cash flows.
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Table of Contents:
  1. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:DEFINITION OF ENTREPRENEUR
  2. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:Possibility of New Venture Formation
  3. ENTREPRENEURIAL PROCESS/START UPS:GOVERNMENT AS AN INNOVATOR
  4. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND:ENTREPRENEURIAL PROCESS
  5. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…)
  6. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP
  7. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):PROBLEMS AND SUCCESSFUL EFFORTS
  8. THE INDIVIDUAL ENTREPRENEUR:ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
  9. THE INDIVIDUAL ENTREPRENEUR (continued…):Personal Values, Work History, MOTIVATION
  10. THE INDIVIDUAL ENTREPRENEUR (continued…):ROLE MODELS AND SUPPORT SYSTEMS
  11. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES:INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES, Minority interests
  12. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):DIRECT FOREIGN INVESTMENT
  13. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):BARRIERS TO INTERNATIONAL TRADE
  14. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):ENTREPRENEURIAL PARTNERING
  15. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):SOURCES OF NEW IDEAS
  16. CREATIVITY AND THE BUSINESS IDEA:METHODS OF GENERATING NEW IDEAS, CREATIVE PROBLEM SOLVING
  17. CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS
  18. LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS
  19. LEGAL ISSUES FOR THE ENTREPRENEUR:TRADEMARKS, LICENSING
  20. LEGAL ISSUES FOR THE ENTREPRENEURS:PRODUCT SAFETY AND LIABILITY, INSURANCE
  21. CREATING AND STARTING THE VENTURE:WHAT IS THE BUSINESS PLAN, PRESENTING THE PLAN
  22. CREATING AND STARTING THE VENTURE (Continued….):WRITING THE BUSINESS PLAN
  23. CREATING AND STARTING THE VENTURE (Continued….):
  24. CREATING AND STARTING THE VENTURE (Continued….):WHY SOME BUSINESS PLANS FAIL, MARKETING PLAN
  25. THE MARKETING PLAN:MARKET RESEARCH FOR THE NEW VENTURE
  26. THE MARKETING MIX:STEPS IN PREPARING THE MARKETING PLAN
  27. THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS
  28. THE ORGANIZATIONAL PLAN (Continued….)
  29. THE ORGANIZATIONAL PLAN (Continued….):THE LIMITED LIABILITY COMPANY
  30. THE FINANCIAL PLAN:OPERATING AND CAPITAL BUDGETS
  31. THE FINANCIAL PLAN (Continued….):PRO FORMA INCOME STATEMENTS, PRO FORMA CASH FLOW
  32. PRO FORMA SOURCES AND USES OF FUNDS:PERSONAL FUNDS, FAMILY AND FRIENDS
  33. PRO FORMA SOURCES AND USES OF FUNDS:COMMERCIAL BANKS
  34. BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS
  35. SOURCES OF CAPITAL:GOVERNMENT GRANTS
  36. SOURCES OF CAPITAL:PRIVATE PLACEMENT, BOOTSTRAP FINANCING
  37. CAPITAL SOURCES IN PAKISTAN:PROVINCIAL LEVEL INSTITUTIONS, FINANCIAL INSTITUTIONS
  38. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  39. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  40. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  41. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  42. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  43. NEW VENTURE EXPANSION STRATEGIES AND ISSUES:JOINT VENTURES, ACQUISITIONS
  44. NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….):DETERMINING THE PRICE FOR AN ACQUISITION
  45. ENTREPRENEURSHIP & PAKISTAN:GENDER DEVELOPMENT STATUS WOMAN AS AN ENTREPRENEUR IN PAKISTAN