ENTREPRENEURSHIP

CHAPTER THREE
TYPES OF NEW VENTURES
‘To find out what one is fitted to do, and to secure an opportunity to do it, is
the key to happiness.’

Which is best: starting a business from scratch or buying an existing one?

Setting-up an independent operation or owning a franchise? Working part-time or
full-time? Each of these options has its advantages and disadvantages and, for the
aspiring entrepreneur like you, each should be weighed against
 The product he or she wishes to offer,
 The intended customer base, and,
 The abilities, character, and work habits of the entrepreneur.
For example, if an entrepreneur is socially oriented then he or she should
probably avoid businesses that demand long periods of solitude. Equally, those
who enjoy working by themselves should avoid a business that requires much
customer interaction. Similarly, entrepreneurs who work best in the morning (or
evening) should gravitate toward a business that requires working during these
times. And business owners that want to start small and stay small will have
different needs and concerns than those who have plans to grow.
With so many options available the following advice should prove helpful:
 Try a business first before starting one. ‘Before choosing a long-term career
path, talk with people who have taken the same one,’. Or volunteer to work
part-time in a similar business or industry to ensure that it’s everything you
expect it to be,’. Another option is to discuss personal needs and abilities with
family, friends, and colleagues. They may be able to help simply by stating
the obvious. Whichever option is chosen, making a life-changing decision
should not be done alone, particularly when it involves others. Ask for advice
and opinions of those in the know.

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 Would you be willing to spend a lot of money to have someone else set-up a
business for you? If so, you may wish to consider buying an existing business
or franchise. Note, however, that this does not make running a business any
easier. The owner of a McDonald’s franchise in London, England, for example,
says that she often stays in her office until ten o’clock at night completing the
unending stream of paperwork that running a food service requires.
 How much time are you willing to spend on a business or idea? The amount
of time it takes to learn a new trade or skill and get a new business venture
up (and keep it up) is considerable. In effect, when starting a business,
entrepreneurs begin their professional life all over again from the bottom. For
example, many years ago a friend of mine sold his dental laboratory. He
spent years building it, but after too many long nights completing day-to-day
business activities and keeping up with government regulations and
insurance requirements in addition to his regular lab work he decided that
he would rather have a nine-to-five job at a hospital so he could spend more
time with his son.

The Options

Generally speaking, there are four types of business operations from which an
entrepreneur can choose:

Part-Time Businesses:
Most part-time enterprises operate during evenings and/or weekends. Since this
type of employment is often an offshoot of a hobby or other interest, the benefits of
working in this manner can translate into enormous job satisfaction. Other
advantages include ;
 Not having to leave another job and/or avoiding the financial risk of
investing in a full-time business.
 Tax advantages are an additional bonus for part-time entrepreneurs if
working from home can be claimed as a tax deduction.
 Part-time work also allows an entrepreneur to ‘test the waters’ of a potential
full-time endeavor before taking the plunge, thereby providing valuable
research and experience and possibly lowering risk.
The disadvantages of a part-time business include ; the fact that,

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 the work the entrepreneur performs often falls behind other more pressing
commitments such as a full-time job (which means that the part-time
business may never fully function because enough time can’t be devoted to
it).
 Additionally, businesses that operate part-time and require direct customer
engagement provide customers with less time to purchase or partake in the
product or service being offered.
 Lastly, a feeling of holding down two jobs can be unhealthy and possibly
lead to marital or social problems.

Full-Time Businesses
They fall into three categories: Start-ups, Existing Businesses, and Franchises.
The start-up business
This involves building a business from scratch (which often requires years of hard
work). If successful, however, many entrepreneurs insist that the results are very
rewarding Suffice it to say that building a business from the ground up is the most
time-consuming and arduous of an entrepreneur’s options. According to one self-
made businesswoman, the difference between starting a business from scratch and
buying an existing one is comparable to giving birth to a baby or adopting one
that’s already been potty trained. Either way, hard work lies ahead.

Buying an existing business

This is an alternative well worth exploring, however, before handing over hard-
earned cash for a business that’s on the market it’s imperative to first know why
it’s for sale. Several years ago, for example, i decided to buy a beauty enterprise
that was on the market for 100,000frs. Fortunately, before any money changed
hands, a licensed appraiser discovered that it was only worth 15,000frs because it
was unprofitable, it had no contracts to guarantee future sales, and the equipment
that comprised it was outdated and beyond warranty. The moral of the story is that
a sunny climate, a charming setting, or a misplaced romantic notion of business
ownership are not valid reasons for buying (or starting) a business. Similarly, it’s
wise to be skeptical of stories from sellers about sickness, dreams of retirement or
travel, and so on. Many businesses are on the market because demand for their
products or services no longer exists. That’s why having experience with related
merchandise, equipment, and customers is so important. Before buying, think
about procuring the services of a non-biased, outside professional to help
determine what an on-the-market business is really worth. The costs involved in

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running the business and any hidden dangers or debts should also be determined.
Investigating the real reasons why a business is for sale can be achieved in part by
obtaining answers to the following questions:
What is the business’s history?
Franchising
This is a third entrepreneurship option. When a business wants to increase
its market share or geographical reach at a low cost, it may franchise its product and
brand name. A franchise is a joint venture between a franchisor and a franchisee.
The franchisor is the original business. It sells the right to use its name and idea. The
franchisee buys this right to sell the franchisor's goods or services under an existing
business model and trademark.

Franchises are a popular way for entrepreneurs to start a business, especially when
entering a highly competitive industry such as fast food. One big advantage
to purchasing a franchise is you have access to an established company's brand
name. You won't need to spend resources getting your name and product out to
customers.

Disadvantages include the fact that not all franchises are the helpful, license-to-
print-money operations they claim to be. For example, one entrepreneur in the
United States bought a franchised clothing store thinking that because the name of
the enterprise was well known it was a secure investment. Sometime later,
however, he watched helplessly as an investment company with no retail
background bought the parent company that licensed the franchises. When the
inevitable bankruptcy occurred, he could not bail out without permission from the
bankruptcy court (which was not forthcoming) and he – as well as all the other
franchise owners - lost his security deposit and investment (Halloran, 1992).

Points to note
When perusing available business ownership options, remember that the
abilities, character, and needs of the entrepreneur should match the type of
business the entrepreneur wants to run, the product being sold, and the customer

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base being served. The better the match the greater the chance of success and
fulfillment.
Know your strengths, weaknesses, skills, experience, and limits before going
into business.
Compare your options and your abilities with the needs of prospective
customers before making any business commitment.
Ensure that there’s a good fit with the product or service you wish to offer
and the type of business you envision. For example, if you wish to start a part-time
personal accounting service you may need to be available during more than just
weekends and evenings.
Get a full picture of local, state, and national laws – as well as licenses and
permits - before jumping into a new business venture. The industry you want to
work in may be so over-regulated that you may not be able to pursue exactly what
it is you wish to do.
Don’t forget to work out how customers will fit in to your business plans.
Ask a lot of questions when buying an existing business. If possible, try to get
the owner to commit (in writing) to providing assistance for a set period of time
after the sale in order to ensure a smooth transition.
Always check the background, present conditions, and the potential future
of the business you wish to buy before signing anything.

ENTREPRENEURIAL STYLE
If you want to test a man’s character give him power.
At some point in every new business, the ethereal ideas and creative spirit
behind entrepreneurship will collide with the down-to-earth realities and practical
logistics of management. So perhaps the best way to present a rich and accurate
concept of management is to look at what good managers do or are supposed to do
in the course of a typical working day. A good managers constantly streamline
their organizations toward making a sale. In other words, good managers keep
their organizations on track by ensuring that everything that’s being done is
ethically geared towards providing what customers want. In this regard, a good
manager is responsible for reducing ambiguity, keeping costs down, eliminating
waste, and motivating others to do the same. Good managers take educated risks
and exercise good judgment. These risks include trying new things, successfully

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adjusting to change, developing subordinates (good managers aren’t afraid of

letting other people shine - in fact they encourage it), and improving their own
skills.
Since most managers are responsible for more work than one person can normally
perform, a good manager also delegates and integrates his or her work (or the work
of others) by acting as a clear channel of communication within the business that
he or she serves. Good management is therefore injecting motivation, creativity,
discipline, and enthusiasm into areas in which they either don’t exist or they’re not
wanted. Successful management entails doing difficult and time-consuming tasks
a manager does not want to do in order to get the results he or she wants. And
while all that’s going on, the ups and downs of life have to be dealt with including
fear, insecurity, births, deaths, romances, divorces, physical injuries, bad hair days,
bad-manner days, personal failings, and attitude problems to name just a few.
People who are good managers face problems rather than run from them, put
in long productive hours, set a good example, and have an inherent knack to create
something from nothing. Good managers work well with others (including those
they don’t like) and they can be counted on to be honest and upstanding. They
concentrate on goals and results rather than showing everyone who’s boss because
the creed they live by is integrity, responsibility, and maturity. This means financial
figures aren’t manipulated and production numbers aren’t fiddled. Of course that’s
not to say that good managers always score; they most certainly do not. But when
good managers don’t succeed the first time, they pick themselves up, brush
themselves off, learn from what happened, and then score. Good managers create
value; they don’t make excuses or blame others, they produce results.

The Two Choices of Management

What will you do, as the manager of a business, when faced with work-
related questions or problems? In most instances, by understanding that only one
of two choices is available. This is not an exaggeration. There are no shades of grey
here and there is no middle ground. The first choice is to serve your business’s

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customers. The second choice is for the manager to serve himself or herself, which
means allowing insecurity, incompetence, ego, or greed or a combination thereof
to prevail.
Serving a business’s customers involves finding out what they want (as well
as how, when, and where they want it) and then moving heaven and earth to
provide it.
Serving customers also involves finding good people (employees, suppliers,
contractors, and other stakeholders), educating (training) them, and giving them
what they need so that they know the requirements of the business, the owner
knows their requirements, and the two can serve each other. The end result, if all
goes well, is that paying customers are served best and everyone prospers as a
result. Any other act or behavior is simply self-defeating.
For example, if an employee or a paying customer approaches you with a good
idea and you immediately say ‘no’, you’re probably serving your ego (saying no is
the quickest way to let everyone know that you’re the boss). If you say ‘no’ because
you’re not sure how or if the idea will work, then insecurity is being served (a major
part of any manager’s job is to find out how new ideas can work). If you say ‘no’
because implementing the idea will involve additional work (as new ideas often
do), you’re serving your incompetence. And if you say ‘no’ because the idea will
allow someone else to shine, you’re serving greed (not to mention ego and
insecurity as well).

EXERCISE
A Case Study
Several years ago, a woman who had been named as the director of a large
international charity for underprivileged children invited me to a dinner party at
her home. Seated at the table was a long-time friend of hers, a man from a
prominent family who owned a successful marketing firm. During the meal he
mentioned that he loved to make donations to worthy causes. ‘Whatever you need
I’ll be happy to provide it for free,’ he said. ‘I love doing pro bono work for
charities.’

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‘No thank you,’ the hostess replied, ‘that’s not the way we do things where I work.’
Make no mistake, she is a lovely person, highly intelligent, university educated, a
joy to be around, and honest to a fault. And before I continue, let it be known that
the donation she was offered was both genuine and sincere.
So why did she let her customers down and who is she serving by doing so?
Analyse this situation in respect of the two choice of management choice.

ANSWER
Knowing this person fairly well, it’s safe to say that she’s not greedy. If she had
said ‘yes’ in order to conduct an act of embezzlement or to otherwise steal the
limelight from someone, than she could be accused of greed, but that is not the case
here.
Was her ego responsible? Perhaps. Too many managers seem to believe that
turning down new ideas immediately shows that they’re the boss. In other words,
saying ‘no’ is a quick way to feed a hungry ego.
Is she incompetent? Obviously, she didn’t know how to handle the donation
(perhaps because she had never been offered one like it before), which is a fair
enough mistake for any new manager to make. Unfortunately, since she didn’t
bother to find out how the donation could be put to use before making her decision,
her action typifies incompetence. A manager’s job is to learn how to do old things
in new ways as well as to explore new ways to serve customers better – not to
maintain the status quo.
Is she insecure? Absolutely. In fact, she admitted during dinner that she was having
difficulty learning her new responsibilities. Insecure managers often say no to
untried suggestions because they’re unsure of the outcome if they say yes. They
therefore play it safe. Saying no also has another benefit. It prevents a manager
from having to do more work, which new ideas and suggestions almost always
initiate.
The bottom line is that our hostess was serving a number of her inner needs – none
of which involved her customer base.

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Common Management Styles

For many managers, power is mostly wielded through trial and error. The style
that worked well enough in the past is then dragged out and used again. And
again. The number of management styles that exist are probably too numerous to
list, however, acclaimed management researcher Charles Handy has classified six
of the most common ones as follows:
1. Force is the crudest method of influencing others. It derives from pure
authority and ranges from outright threats to bullying and violence.
2. Rules and Procedures. Setting down concrete rules and guidelines is another
time-honored way to control others and is often the favored method of
bureaucracies.
3. Exchange. Bargaining, negotiating, cajoling, and bribery fall under this
category. Promotions, pay increases (bonuses), rewards, and recognition
are more subtle examples.
4. Persuasion is usually the first method of choice used by managers. In
practice, however, it’s usually contaminated by one of the other methods
mentioned here.
5. Ecology is the use of environmental surroundings to exercise influence.
This includes wielding power in a crisis. For example, three common
ecological moments that can be capitalized upon by most managers
include: 1) when negotiating a contract, 2) during the first six months of
employment, and, 3) during any moment of crisis.
6. Magnetism is sometimes witnessed in its abuse stages by sales people, faith
healers, and religious fundamentalists. Personal charisma and cultivating
followers are key.

So Which Style is Best… and When Should It Be Used?

One of the biggest dilemmas managers face is when to use these styles to produce
results. Unfortunately, one size does not fit all. Successful solutions are relative to
the people involved and the situation encountered. What works for one manager
may or may not work for another. Equally, what works one day may not work the
next. For example:
 Using force or fear may achieve immediate results, but the results could be
short-lived and lead to high employee turnover.
 Rules and procedures can effectively control behavior, but often drain a
workplace of creativity, and morale.

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 The exchange method can prove to be a good motivator, but what happens
when everyone expects some type of reward in exchange for doing a task?
The result can be expensive, time consuming, and/or produce a lack of
respect for management.
 With excessive use of the ecology method, managers might be seen as
opportunistic or conniving.
 As for magnetism, well, as the expression says, ‘you can fool some of the
people some of the time …but not all of the people all of the time.’

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