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)