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Management & Ownership Business Plan Workshops TL Hill tlhill@temple.edu 215-204-3079 Business plan workshops Feb 12: Financial Analysis for Entrepreneurs Feb 19: Matching Products and Services with Markets Feb 26: Competitive Analysis Mar 18: Strategy & Business Model

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management ownership

Management & Ownership

Business Plan Workshops

TL Hill

tlhill@temple.edu

215-204-3079

business plan workshops
Business plan workshops
  • Feb 12: Financial Analysis for Entrepreneurs
  • Feb 19: Matching Products and Services with Markets
  • Feb 26: Competitive Analysis
  • Mar 18: Strategy & Business Model
  • Mar 25: Marketing and Sales Strategies
  • Apr 1: Management & Ownership
  • Apr 8: Professional Presentations
  • Weds: Financing New Ventures
    • Wednesday mornings through Apr 28, 9:30-11:30, TUCC
business plan outline www sbm temple edu iei word planigenttemplateoutline 003 doc
Business plan outlinewww.sbm.temple.edu/IEI/word/planigenttemplateoutline_003.doc
  • Technology Plan
  • Management & Organization
  • Social Responsibility
  • Development & Milestones
  • Financials
    • Including Capital Requirements & Financial Statements
  • Appendix
  • Executive Summary
  • Company Description
    • Including product/service & technology/core knowledge
  • Industry Analysis & Trends
  • Target Market
  • Competition
  • Strategy/Business Model
  • Marketing and Sales Plan
  • Production/Operations Plan
business model
Business model
  • What a firm does, and how, to build and capture wealth for stakeholders.
  • Translates strategic position into a business structure and a set of functional strategies.
  • Includes a trajectory of growth:
    • a timeline, milestones, infusions of capital, growing revenues, growing, changing expenses.
people power6
People power
  • Success depends on teams of people
    • Right skills
    • Right personalities
    • Right arrangement
    • Right structure
  • More important even than capital
    • More versatile
  • Most difficult to find, to keep, to manage
execution
Execution
  • Reliable delivery on tasks
    • Accurate
    • As promised
    • On time
    • On budget
  • Right people, right resources
  • Systems, controls, incentives
  • Relentless attention
know how
Know-how
  • Tacit knowledge
    • Experience-based knowledge of how to do certain things
    • Skill-based, knowledge-based, practice-based
    • Typing, pipe-laying, negotiating, keeping books
  • Core competencies
    • Highly developed, specialized tacit knowledge
    • Important, rare, inimitable, irreplaceable
    • Shared, embedded in relationships
    • Drives innovation, builds & sustains advantages
bridging
Bridging
  • Bridges to scarce resources
    • Information, skills, customers, physicalassets, cash
  • Map links…
relationships
Relationships
  • Business is very personal
    • Sex & money
    • Identity & self respect
  • Relationships are central to business
    • Partnership for coping with uncertainty
    • Grow together
    • Spend a lot of time together
  • Business relationships demand trust& authenticity
relationships evolve
Relationships evolve
  • Relationships grow through four stages
  • Incremental process of building trust & learning to work together

STORM

NORM

FORM

PERFORM

trust is directly proportional to authenticity experience
Trust is directly proportional to authenticity & experience
  • Project open, genuine interest
  • Demonstrate respectful equality
    • Through language, posture, listening, performance.
  • Respond honestly and directly
  • Find ways to work together
  • Do what you promise
  • Attend to the little things
  • Respect confidentiality
relationships thrive on managed expectations
Relationships thrive onmanaged expectations
  • Clear roles & boundaries
  • Clear deliverables
  • Clear communications
  • Clear rewards & consequences
  • Opportunities for feedback & learning
entrepreneurial leadership
Entrepreneurial leadership
  • Inherent aptitude
  • Learned skills and approach
  • Passion
  • Perseverance
  • Opportunity (calling)
entrepreneurial leadership15
Entrepreneurial leadership
  • Entrepreneurs have little trouble
    • Holding on to a vision
    • Acting on new ideas
    • Pushing themselves and others
  • Entrepreneurs typically have more trouble
    • Sharing their vision
    • Measuring results in useful ways
    • Empowering their managers
    • Disciplining their action towards building the organization
building blocks of motivation
Building blocks of motivation

Incentives

Participation

Feedback

Education

Vision

learning based progress
Learning-based progress
  • The goal is to create a circle of learning and change rolling towards the vision...

Participatory Change

Action

Vision

Learning

Rewards

MeasuredPerformance

vision grounds action
Vision grounds action
  • Help the entrepreneur articulate her/his core values and driving vision
    • Builds trust
  • Relate recommendations to the vision
    • Releases energy for change
  • Examples
    • Food delivery: On-time & profitable
    • Publishing: Editorial & financial independence
education enables action
Education enables action
  • Root recommendations in what the entrepreneur knows
    • Link theory to practice
  • Examples
    • Food delivery: Profitable cherries
    • Publishing: Reduce 300-day operating cycle
feedback disciplines action
Feedback disciplines action
  • Develop user-friendly measures that track recommendations and how they affect firm performance
    • Challenge of structure
  • Examples
    • Food delivery: Profit per truckload delivered
    • Publishing: Turnover (months inventory), plus reprint guidelines
meaningful participation energizes action
Meaningful participation energizes action
  • Expand participation
    • To those who know and can make a difference
    • The challenge of sharing control
  • Reward participation to avoid educated fans
    • Bonuses, stock options, phantom stock
    • Expanded scope of control
  • Examples
    • Food delivery: Bonuses tied to per-truck profit
    • Publishing: Improved cash flow linked to more influence and less stress
exercise people power inventory
Exercise: People power inventory
  • What does your business model require?
    • Skill sets, customer types, resources, attitude?
  • Who do you have on board?
    • What do they bring to the firm?
    • Is the group compatible?
  • Who do you need?
    • In what roles?
management responsibilities
Management responsibilities
  • Vision
    • Blends personal & organizational visions
    • Fosters common culture
  • Strategy
    • Environmental scanning
    • Strategy
    • Measurable objectives
  • Resource development
    • Tools, systems, education
management responsibilities25
Management responsibilities
  • Systems
    • Efficient, effective processes
    • Fit between systems
  • Coordination
  • Execution
  • Relationships
  • Staff development

The mix of responsibilities changes with growth.

development start up
Development & start-up
  • Focus: Bringing product to market
  • Identify opportunity
  • Assess feasibility
  • Identify & accumulate resources & networks
    • $$, people, information, intellectual property
  • Plan details
  • Assemble team and resources
  • Launch…
development start up decision making
Development & start-updecision making
  • Centralized
  • Informal
  • Non-specialized
  • Extremely flexible
  • Increasingly short time horizon
growth
Growth
  • Focus: Execution – and adjusting plans and strategy to reality
  • Building market share
  • Building management team
  • Building product delivery system
  • Transitioning from entrepreneurial to more managerial leadership
  • Surviving a rapid succession of challenges as approach growth wall
growth decision making
Growth decision making
  • Centralized and informal
  • But transition to team decisions
  • Flexible
  • But increasing structure and specialization
  • Short time horizon
stabilization
Stabilization
  • Focus: Profitability and long-term prospects
  • Consolidating market share
  • Tweaking internal systems
  • Coping with slowing sales growth
  • Coping with increased competition
  • Institutionalizing innovation
  • Planning for next five years
  • Considering exit – is the entrepreneur a manager?
stabilization decision making
Stabilization decision making
  • Formalized
    • Process driven, not opportunity driven
  • Decentralized
    • Requires delegation and coordination
  • Specialized
    • Implies more indirect control
  • Long- & short-time horizon
organization design
Organization design
  • Because they face undefined tasks and high levels of uncertainty, early-stage organizations demonstrate little structure in form of job specialization, rules, or formality – and depend on entrepreneur’s direct contact with people, functional areas and projects
functional organizational design
Functional organizational design

General Management

  • Vision & strategy
  • Hiring & culture
  • Resources & controls

Marketing

Sales

Product

Finance

  • Research oriented
  • Supervises making of materials
  • Organize by region
  • Incentive plans are crucial
  • Engineering
  • Sales support
  • Customer support
  • Statements
  • Cash flow
  • HR details
  • Office management
  • Management to add later:
  • HR, Logistics, IT, Counsel
advisory groups expand ability
Advisory groups expand ability
  • Networks
    • Bridges beyond the management team
  • Know-how
    • Affordable experience
  • Accountability
    • Deadlines and reporting help execution
  • Support
    • Been there, done that
    • Burn-out prevention
responsibility charting
Responsibility charting
  • Provides a language and forum for discussing decision making at governance, management or staff levels.
  • Creates greater clarity about how decisions are to be made and who will be accountable for those decisions.
  • Helps raise difficult issues of power & authority.
responsibility chart

DECISION:

Roles Involved

Fin.

CEO

Oper.

Sales

Approve

Responsible

Types of Participation

Consult

Informed

Responsibility chart
responsibility chart details
Responsibility chart details
  • Approve
    • Sign off & veto power
    • Final responsibility to commit resources
    • Shares accountability
  • Responsible
    • Takes the initiative, develops alternatives, recommends, implements
    • Accountable for results
  • Consult
    • Input but no veto power
  • Inform
    • Notify only
exercise organizational design
Exercise: Organizational design
  • Necessary functions
  • Organizational design
    • Internal or external functions (in-house or outsourced
    • Management team vs advisory group functions
    • Structure – flat or hierarchical
governance40
Governance
  • Structured relationship between stakeholders
  • Key agreements that distribute power and responsibility
  • Includes legal and ownership structures
business systems

OwnershipPressures

Family/StakeholderPressures

ManagerialPressures

Business systems
business systems dynamics
Business systems dynamics
  • Each system has its own logic, its own bottom line
    • Ownership: Wealth creation & maintenance
    • Institution: Increasing density of relations
    • Management: Efficiency & replicability
  • Each has its own time horizon
    • Ownership: Ten years or one working life
    • Institutional: Reproduction
    • Management: Quarterly results
business systems diagnostic
Business systems diagnostic
  • What is the next task for this organization?
    • Securing ownership?
    • Strengthening culture?
    • Improving operations or systems?
    • Finding a measure of integration?
governance defines the circles and the relationships
Governance defines the circles and the relationships
  • Who decides what
    • Owners, key employees, key customers, family members, professional advisors
  • Decision makers for each circle
    • Owners (board of directors)
    • Managers (management team)
    • Family/stakeholders (council, shareholder meeting)
  • Scope of each circle’s decisions
  • Responsibility of circles to each other
  • Conflict resolution between interests
governance tools
Governance tools
  • Direction
    • Vision, values, culture
  • Agreements
    • Contracts, bylaws, charters
  • Support
    • Facilitators, advisors, models
governance example
Governance example
  • Company with strong family ties & 3 sons
  • Owner’s retirement needs drive succession
    • Two sons buy business (not land) from father
    • CEO-in-training - 50.+%; Sales manager 50-%
    • Board advisors
  • Family needs led to side business:
    • Graphic artist, co-owned by CEO-in-training and serving main business
  • Family council
    • Oriented towards growth of sons, management of estate
  • Board of advisors for larger business
    • Management of larger business
  • Management teams as appropriate
exercise governance
Exercise: Governance
  • Who are your stakeholders?
  • What influence will they have?
  • What structures might organize that influence?
legal structures
Legal structures
  • Grow out of governance concerns
    • But have liability and task implications
  • Sole proprietorships
  • Partnerships
  • Corporations
    • S corporation
    • C corportaion
    • Stakeholder Corporations
      • ESOPs, cooperatives, joint ventures, community corporations, professional corporations (LLC)
sole proprietorships
Sole proprietorships
  • Disadvantages
    • Unlimited liability
    • Lack of continuity
    • Limited availability of capital & financing
    • Limited viewpoint & experience
  • Advantages
    • Ease of formation
    • Sole ownership of profits
    • One controlling party
    • Flexibility
    • Relative freedom from government control
    • No corporate business taxes
partnerships
Partnerships
  • Disadvantages
    • Unlimited liability of general partners
    • Bound by acts of partners
    • Lack of continuity
    • Difficulty in obtaining financing
    • Difficulty of disposing of partnership interest
  • Advantages
    • Ease of formation
    • Flexible
    • Facilitates growth and performance through direct rewards
    • Relative freedom from governmental control and regulation
    • Possible tax advantage
partnership details
Partnership details
  • Types of partnerships
    • General, Limited, LLP, R&D Ltd
  • Partnership agreements
    • Name, purpose, domicile
    • Duration
    • Responsibilities of partners
    • Division of profits and losses
    • Death of a partner
    • Sale of Interest/Addition of new partner
    • Business expenses
    • Settlement of disputes
corporations
Corporations
  • Definition
    • Legal entity separate from owners
    • Artificial being with continuous life
    • Person before the law
  • Types
    • Domestic vs. Foreign
    • Public vs. Private
    • Profit vs. Nonprofit (501 (c) 3)
    • Professional or stakeholder corporations (LLC)
  • Forms
    • C Corp
    • S Corp
    • LLC
corporations53
Corporations
  • Disadvantages
    • Activity restrictions
    • Lack of representation
    • Regulation & reporting
    • Organizing expenses
    • Double taxation (except S corp)
  • Advantages
    • Limited liability
    • Transfer of ownership
    • Unlimited life
    • Relative ease of securing capital in large amounts
    • Increased ability and expertise that comes with stability and wide ownership
costs of incorporation
Costs of incorporation
  • Lawyer’s fees – $1500 –5000
  • Accountant’s fees
  • Fees to state
  • Unemployment insurance tax
  • Employer’s contribution to social security
  • Annual legal and accounting fees
pa requirements for domestic corporations
PA requirements for domestic corporations
  • File articles of incorporation with the PA Dept of State
  • Register with the commonwealth
  • Maintain a registered office within PA
  • Pay the required $100 filing fee
s corporation
S Corporation
  • Corporate liability advantages withsingle taxation
  • Strict guidelines
    • Domestic, no corporate or partner shareholders
    • Less than 75 shareholders
    • No nonresident alien shareholders
  • Losses can offset personal income
  • Undistributed income can be taxed at individual tax rate
limited liability corporations
Limited liability corporations
  • Hybrid: Limited liability of corporation with tax advantages of partnership
  • Profits are passed through to shareholders
  • Liability limited to investment
  • Corps, partners, and foreign investors may be shareholders
  • No limit to number of shareholders
  • LLC statures differ by state
stakeholder corporations
Stakeholder corporations
  • LLC, nonprofit, or C corporation structure
    • Some special structures – notably cooperatives
  • Owners have other stakes
    • Employees (ESOPs, cooperatives), community members
  • Encourage active involvement of stakeholder owners
    • Special governance structures
entrepreneurial realities
Entrepreneurial realities
  • No right answers
  • Marketplace rules
  • Persistent trial and error
  • No lone wolves
  • Strength of weak ties
  • No excuses
  • Execution
  • Life choice
bibliography
Bibliography
  • Kelin Gersick, Ivan Lansberg et al, Generation to Generation: Life Cycles of the Family Business (Harvard Business School Press, 1997).
  • TL Hill, Family Business Lectures, 2002.
  • Ivan Lansberg, Succeeding Generations: Realizing the Dream of Families in Business (Harvard Business School Press, 1999).
  • Thomas O’Malia & Margaret Whistler, The Entrepreneurial Journey (South-Western/Thomson, 2003).
  • Temple University Small Business Development Center business start-up pack
  • Jeffrey Timmons & Stephen Spinelli, New Venture Creation: Entrepreneurship for the 21st Century (Irwin/McGraw Hill, 2003).
  • Monica Zimmerman Treichel Lectures, 2002