CHAPTER 5

GROWING THE
ENTERPRISE
Enterprise
 Is all about finding new business opportunities and
taking advantage of them to make a profit.
 Most commonly, "enterprise" refers to a business
organization, particularly a large or complex one.
 It can describe a company, firm, or business
venture.
 It is an organization or a company that is
established with the aim of generating profit
through the production, sale, or trade of goods and
services.
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Entrepreneurs
 An entrepreneur is someone who:
 Starts and manages their own
business.
 Takes on the financial risks involved
in doing so.
 Often innovates and brings new
ideas to the market.
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Forms of Enterprise
• There are three major forms of enterprise:-
a) Sole-proprietorship:
 Owned and operated by one individual.
 Simple to set up, but the owner has unlimited liability.
b) Partnership:
⁃ Owned by two or more individuals.
⁃ Can be general (all partners share liability) or limited
(some partners have limited liability).
⁃ Not separate from the owners in terms of responsibility
and liability.
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Forms of…
c) Corporations:
⁃ A separate legal entity from its owners
(shareholders).
⁃ Offers limited liability, but involves more
complex regulations.
⁃ Ownership in a corporation is divided into units
called shares of capital stock.
⁃ Owners are called shareholders or stockholders.
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Types of Enterprise
 Service organization – provides services (does
something for you) rather than selling something.
 Merchandising business – buys finished goods and
then resells them to customers.
 Manufacturer – company that produces finished
goods from raw materials by using various tools,
equipment, and processes.
 Financial Services Company – doesn’t make
tangible products and doesn’t sell products made by
other companies; deals in services related to money.
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Factors influencing success
a. Value chain management: This represents the full range of
activities a business performs to bring a product or service to
market.
• Cooperation with suppliers, distribution, agents and customers.
b. Market scope: Variety of customers and market segments, and
geographic reach.
c. Firm age: the length of time a business has been in existence.
• How profitability, growth, and stability change over a company's
lifespan.
• How a firm's ability to innovate changes as it ages.

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d. Size of founding team: Likely to bring additional and more diverse
expertise to the ventures and better decision making.
• A larger founding team can distribute the substantial workload of
a startup, allowing for specialization in different areas.
• A team with diverse backgrounds and skill sets can bring a wider
range of perspectives and problem-solving abilities.
• Each founder brings their own network, potentially expanding the
company's access to resources, connections, and opportunities.
e. Financial resources: the assets, funds, and means available to
businesses to meet their financial needs and objectives.

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f. Founders’ marketing experience:
- Experienced founders are better equipped to identify and understand
their target audience, their needs, and their preferences.
- They can create and implement comprehensive marketing plans that
align with the company's goals and resources.
- They can effectively allocate marketing resources and optimize
spending to maximize return on investment.
- They are able to quickly adapt their marketing strategies to changing
market conditions and customer preferences.
- They have a better ability to create valuable partnerships that can
increase the reach of the company.
- They will have a better understanding of how to obtain customers in a
cost-effective way.
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g. Founders’ industry experience: Experienced founders
can navigate industry-specific challenges more
effectively, avoiding common pitfalls and accelerating
their time to market.
• It provides a competitive advantage by fostering
credibility, building networks, and accelerating the
learning process.
h. Existence of patent rights: Patents can provide
businesses with a significant competitive advantage
by allowing them to exclusively control the production
and sale of their inventions.
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This can lead to increased
market share and profitability.
Acquiring the Resources and
Funding
The potential sources of initial funding for creating a new venture include:
1. Personal Savings (Bootstrapping):
• This is often the first and most common source. Founders invest their own
money, demonstrating their commitment.
• This method allows for full control of the business.
2. Friends and Family:
• "Love money" from close connections.
• While helpful, it's essential to formalize agreements to avoid relationship
strains.
3. Angel Investors:
• Wealthy individuals who provide capital for early-stage startups.
• They often offer mentorship and industry expertise.
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4. Venture Capital (VC):
• Firms that invest in high-growth potential startups.
• VCs typically seek a significant return on their investment and may take
an active role in the company.
5. Crowdfunding:
• Raising small amounts of money from a large number of people, usually
online.
• Platforms like Kickstarter and Indiegogo are popular.
• This can also be a way to test market demand.
6. Small Business Loans:
• Loans from banks or credit unions.
• Often require a solid business plan and collateral.
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7. Government Grants and Programs:
• Government agencies may offer grants or loans to
support specific types of businesses, such as those in
technology or innovation.
• These can have strict requirements.
8. Incubators and Accelerators:
• Programs that provide startups with resources,
mentorship, and sometimes funding.
• They often take an equity stake in the company.
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• However, a new venture requires financial restructuring every three years
if it is to develop and grow.
• Each stages of development have different financial requirements:
1. Initial financing for launch
• Include the purchase of accommodation, equipment and other start-up
costs, plus the day-to-day running costs such as salaries, utilities and so
on.
2. Second-round financing for initial development and growth.
3. Third-round financing for consolidation ( i.e, process of making
something stronger) and growth.
4. Maturity or exit
• capital for strategic acquisitions, research and development, and
maintaining competitiveness.
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Growth and performance of new
venture
• New ventures are an engine for job creation, innovation, and
development.
• Both internal and external factors contribute to the success and growth
of a new venture.
• Internal factors include the education, experience and capabilities of
founders, and a focus on innovation and planning.
• External factors include access to complementary resources, social and
business networks, and the regional and national context.
• The availability of financial resources is a significant constraint, not so
much at the initial stages but for subsequent development and growth.
• However, innovation promotes the development and growth of a new
venture, and this demands access to complementary resources and
capabilities within the new venture and throughout its external networks.
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Why may a new venture fail?
The most common reasons new venture failure include:
A. Financial Mismanagement:
 Many startups underestimate the capital required to
sustain operations until profitability.
 Difficulty securing funding or poor budgeting can lead
to running out of money.
 Inability to manage incoming and outgoing cash
effectively.
 Underestimating costs and overestimating revenue.
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B. Operational and Management Problems:
 Lack of a solid and realistic business plan.
 Inability to execute the business concept.
 Lack of experience, expertise, or leadership skills.
 Ineffective delegation and communication.
 Conflicts among co-founders or team members.

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C. No strategy for transition, growth or exit
 Preparing for changes in leadership, ownership, or business
structure.
 Defining how the business will scale, expand its market reach,
and increase revenue.
 Planning for the eventual sale or transfer of the business.
• Common exit strategies include:
o Acquisition by another company
o Initial public offering (IPO)
o Management buyout
o Passing the business to family members.
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How may a new venture grow?
There are many ways a new venture can grow and create
additional value:
• Targeting New Customer Segments
• Geographic Expansion
• Expanding Product/Service Offerings
• Strengthening Online Presence
• Building Strong Customer Relationships
• Strategic Partnerships
• Optimizing Resource Management
• Managing Finances
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THANK YOU!