June 2010

By Frances Wright
 
It is so much fun to start a business, especially if you have done the necessary market research and are confident that what you provide is in line with a specific market need and you know you can sell ice to an Eskimo.  It is then just a matter of identifying your target market and telling them that their lives will never be the same again - because you have the solution to their need. 

The next phase is about choosing the name of your new company, designing the logo and tagline, finding premises, forging relationships with suppliers, etc. etc.  It is like going on honeymoon.  You dream of the good life this business is going to provide, what you are going to do with all the profits, where you are going to travel to.  But most forget that the honeymoon phase ends.

Just as you start thinking that the first couple of clients were secured quickly and easily, you start having anxiety attacks about whether you are going to be able to service them adequately, whether they will be happy with the product, whether there will be returns or rejections.  None of those fears become a reality and soon more clients follow. 

You just cannot cope with the workload anymore - working until three in the morning trying to get everything done.  The cash flow is becoming a problem as you have to service all these clients, so you have to appoint staff and, while you feel like all your dreams are coming true, you cannot understand why you have no quality of life anymore.  Never mind a holiday, you just want to spend a weekend with your family. 

Before you know it, you have lots of staff and the overwhelming feeling you have is not one of pride and exhilaration, but one of chaos and exasperation.  You have to make a plan as you know that you cannot carry on like this forever. 

There are many studies about the entrepreneur as the first tier manager versus the second tier manager.  Churchill and Lewis (2000) describe five different phases of business growth: existence, survival, success, take-off and maturity.  It is during the success phase that entrepreneurs suddenly feel trapped in unfamiliar territory.  They had gotten used to the struggle, now have approximately twenty employees and, while they have to get used to the success, they have to manage all these employees too. 

The entrepreneur has to make a transformation to being a leader.  Certain decisions have to be made, such as growth strategies and forecasts.  Often at this stage the founder of the company is replaced by a manager leader, especially when the entrepreneur is not able to make the transformation quickly enough. The challenge is to manage the cash flow required by growth while maintaining the small business advantages that brought about the success, such as flexibility and a sense of community. 

For those entrepreneurs who want to continue to manage their own companies, certain skills have to be developed rapidly:

• Managerial skills and disciplines
• Operational skills such as business process management
• Trust in employees and the ability to delegate
• The ability to develop different divisions in the organisation in order to appoint a 2nd layer of management
• To develop a strategic management style
• The ability to track and manage performance
• Standardisation of processes in order to deliver a uniform product or service

Only entrepreneurs that are secure in themselves, who never feel threatened by superior abilities in employees, will be able to successfully grow their companies into the maturity phase.  Nobody can know everything and one of the secrets to success is to surround yourself with skills and abilities that, as an entrepreneur, you do not have.  In order to do this, the entrepreneur has to see the organisation as a whole, comprised of necessary components; human resource management, supply chain management, financial management, quality control, technology and production.  All of these components must support and sustain the main product or service and work towards creating automation and replicability throughout the organisation. 

The first requirement when attempting to foster such an environment is to recruit the correct people to manage these components.  Therefore, the first skill an entrepreneur will have to develop is human resource management.  In order to bring together the ideal team, it is necessary to have a clear growth strategy and do the appropriate capacity planning according to job specifications in order to recruit the correct people for the necessary positions.  From the minute the first employee is in place, the responsibility is on the entrepreneur to make the transformation from entrepreneur to leader. 
But what is a good leader?  To be a leader it is important to lead by example, to set the vision of the organisation and to live accordingly.  If employees do not trust the leader’s ethical standards and capabilities, nobody will follow.  When they follow, they will follow in professionalism, dedication, enthusiasm and passion for the organisation.  A fear of failure in the leader will be transferred to the team and be a stumbling block in the formation of a cohesive team.  A leader has to trust in him/herself and have a knowledge and faith in his/her own abilities.  Nobody will believe in an entrepreneur if he doesn’t believe in himself.  With that type of self-believe, the leader must give strong direction in the organisation.  The art of sound decision making is of utmost importance.  A negative leader will transfer negativity to the team, which in turn will impact on the clients and client relationships. 
The road of an entrepreneur is not an easy one and many challenges will be encountered along the way.  When the entrepreneur has made the transition from entrepreneur to leader, these challenges will be approached in a calm and rational manner. The entrepreneurial leader will also keep the main objectives in mind and adhere to the principles and policies of the organisation when challenges arise.