What are the key concepts of entrepreneurship? I tend to revise this question by asking, “What is the key concept of entrepreneurship?” Based on my personal and professional experiences, I always begin with cash flow. My experiences include private and university research on entrepreneurship, a partnership with four brothers for over a decade, and working relationships with entrepreneurs. Through my experiences and those of my highly respected colleagues, we find that the Achilles heel of the majority of new start-ups is the “burn rate” – the rate at which scarce financial resources are utilized. Why does the miscalculation occur? Is it over-optimism with regard to the market plan, pricing of the product/service, or overzealousness? Or, is it that the firm has failed at market intelligence, competitive analysis, or management?

Others contend, and arguably so, that the most important consideration is personnel. I understand their contention. Entrepreneurs must be willing to identify and hire individuals that, at least in their judgment, are brighter, by some set of specific indicators, than they are. And, more importantly, the entrepreneur should not be threatened by the possibility. In general, and I offer this consideration based upon a half century in the business sector and in higher education management, there exists a general tendency for individuals to not make hires or appointments once they sense that a prospective employee has skill sets, competencies, or a level of literacy that is greater than their own. However, as an entrepreneur you should calculate the competency sets required by the firm and determine how these skills complement those already existent within your business. In the final analysis, it’s all about the quality of individuals that you hire—individuals who understand where and how they fit within the organization, what needs to accomplished now, in time period T+1, T+n, etc.

With regard to the “ideal” business model, I tend to introduce the Jack Stack Model. Jack is the CEO of the SRC Holding Company of Springfield, Missouri. In his book, The Great Game of Business, he presents the “open-book management” model. In this model, all employees are engaged in the business’s decision making – whether its marketing, finance, operations, new business development – in a very orderly manner. The concept is underpinned by profit sharing. Profit sharing is the driver. Employees have access to the company’s books, i.e., the company’s finances, in great detail. Openness generates employee trust, empowerment, and creativity that fuels interesting innovation and invention. The latter has led to the conceptualization and development of nearly three-dozen new enterprises in which employees have equity share.

A sometimes overlooked phenomenon of this model is the value of the literacy that is residual, often latent, in the firm’s employees (he may prefer to call them associates). Reciprocally, the respect generated in individuals is expressed through their commitment to the firm, in their willingness to bring forward product enhancement ideas, new product possibilities, and to incur risk-with its associated success or failure. In a word, the model identifies and nourishes the entrepreneurial traits of a firm’s most critical resource – it’s human capital. Overall, SRC is an exemplary illustration of how an entrepreneurial venture can lead to the continued creation and growth of new ventures and, by example, of how an injection of entrepreneurship into a business’s modus operandi can contribute to the success of the company. I see the valuation of competencies as an example of how best to advance both the interests of the organization and its personnel. The great game of business model is an exemplary example. It’s required reading for every entrepreneur.

The third concept that I advocate is that as an entrepreneur you should “walk, not stalk.” Understandably, the entrepreneur has a great deal at stake. However, as the CEO, the leader, the president, the visionary, you must embrace the collaborative model. If you can develop a personalized collaborative model you will be successful, without expecting it, in developing employees that literally “walk through fire” for the firm and for you. The key is to view employees as more than just persons on your payroll and more as individuals who will join the 24/7 club. They will embrace your vision because they see themselves as individuals who seek to fulfill the same purposes as the firm’s founder.

Two other concepts merit consideration and serious contemplation. The two concepts are profit maximization and loss minimization. In the United States, we tend to emphasize profit maximization. I stress that there are occasions, particularly with regard to new start-ups, when the other side of the coin should be considered and questions should be asked: “When is it time to exit? When does the entrepreneur, however painful, walk from the business? When do you sell, even if there is loss involved? Who do you merge with? When do you seek to expand the business through merger or partnership? And, under dire conditions, close it?” There is a certain kind of marketplace efficiency that dictates that if there is no compelling need for this particular venture, at this point in time or in this geographical area, the business should close. This is when the concept of loss minimization becomes crucial; in other words, do not continue to resuscitate a business and give it a life beyond what the marketplace intends. I underscore that you should not ignore the signals of the marketplace – it has a very interesting way of market self-correction.

All of these concepts and considerations should be incorporated into your business plan. The business plan for those not acquainted with the term is the roadmap for your enterprise—from conceptualization to implementation to modification. In preparing the business plan, a variety of questions must be addressed. How do you know if you have a product or service or product/service? How do you conduct appropriate market research to determine whether or not you can confirm that the market is expressing a need for the proposed product or service? Or, are you trying to create a need in the market? If there is a demonstrable need in the market, how will you calculate your share of the market? How do you know if you have properly priced the product or service? Have you built a dynamic financial model using market and price information that will provide answers to all of the “what-if” questions?

To me, the business plan is always a work in progress and never a finished product. At best, the business plan is a snapshot of a business at a specific point in time. So how can the entrepreneur move forward at the margin to measure the vitality of the business? What are the milestones? How do you measure whether or not you are realizing planned goals and whether or not your organization can truly move to the next stage and beyond?

Popularity: 1% [?]