Discuss about the Small Firm Growth is the Only Measure of an Entrepreneurs Success.
An entrepreneur is a person who follows his passion and gets on the path of achieving it through a small firm. Growth of a small firm can be considered to be stepping stones of the entrepreneur’s success (Cooper & Gimeno, 1992).
As the business grows, the entrepreneur gains higher exposure to his business environment and then steadily is able to adapt as well as take measure to make the business powerful in the competitive market. Entrepreneurs design the economy’s future and therefore even government has taken various steps to help their small businesses grow in the form of various incentives and tax benefits (Audretsch & Keilbach, 2004).
Growth of there is not beneficial for their monetary interest but also psychological interest. It helps in motivating them as well as boosting their confidence.
Growth of small firms definitely defines one aspect of the success of the entrepreneur, be it Steve jobs, Dhirubhai Ambani, or JRD Tata all started with a small firm the journey of their dreams and achieved to be the billionaires of the era. The stated preface or introduction speaks about a single aspect of the Success of entrepreneur that is Growth of Small Firm there are various other factors that contribute to their success (Bygrave, 2007).
The Concept of Business growth is one of the primary and most important objective for various firms. Currently society has started giving due importance to this aspect and one of the major evidence is the list that is prepared by the leading media houses, journals and magazines of various successful and accomplished ventures. The basic reason small firm growth is given due priority by government is due to its valuable contribution to the economy. This stand as the major reason why the concept is given due importance.
The concept and terminology of small firm and entrepreneurship is often been inter-linked with each other leading to confusion and ambiguity. In recent times it was considered that all new firms are established were run by their respective founders and owners. Hence, these successfulness of these businesess were often linked with the success of an entrepreneur. (Edvinsson & Malone, 1997).
The terminology entrepreneurship is used in much broader sense. It originally had a very specific connotation referring to the process of Seeding and functioning of of business, and anyone so engaged was considered as an entrepreneur.
Entrepreneurship in today’s world give a wider prespective on occasion, the term is used interchangeably and replaced with enterprise. Lately the globe is driven by the ideology that the word entrepreneur is used for a specific kind of big tech firms or magnum opus start- ups which is lead by the stalwart proprietators like Mark Zuckerberg.
Creation of new economic activities is a part through which the concept of Entrepreneurship is based. In growth if only amount of expansion is taken into consideration then growth is not a part of entrepreneurship. Entrepreneurship remains an paradox even now and the very basic idea that all the small firm establishments are generated and started by an entrepreneur is still under lot of consideration and topic of debate.
Just a little reading or by just skimming and scanning about the topic would make the reader confused and may leave him with a different kind of curiosity (McDougall et al., 1992). Thus, concluding that only small firms growth is the only measure of an entrepreneur’s success would be wrong and thus various other factors which the authorities of the subject have coined out should be studied and only then the success factors must be ascertained with successfulness of an entrepreneur.
To measure current valuation of small businesses considering the country of origin, the primary thing that one needs to understand is what constitutes a small venture. As per the authority board , a small venture is independently owned and functioned and it shows very little influence in its industry and has very limited or less number of personnel working. So how can one differentiate between or rather is there can difference between a small firm owner and an entrepreneur? (Watson et al., 2003).
Most of the small business are staretd as the ventures but not all the owners of the business be considered as entrepreneurs (Jennings & Beaver, 1997) divided the small business into three categories.
Income-replaced firms: These firms are built to facilitate incomes to the owners. The amount is very similar to what one used to earn while employed. The products they offer covers- retail merchandises, or a service like hairstyling or accounting. Most small firm are of this kind.
Sociology firms: People begin the these firms to earn their livelihood while following a certain lifestyle. These firms shows the owners’ hobbies or favorite pursuits for example cricket, swimming, different adventure sports that will help the owner grow and expand . As a thumb regulation, these ventures don’t do anything new or out of the box that might bring new aspects of innovation, and need to grow at an uncontrollable pace. â€¨
Enterprising firms: These owners are people whoâ€¨recognizes an opportunity and develops aâ€¨product to fulfill some certain needs of market segment. They bring innovative products to market. Their primary aim is to expand their ventures and eventually capture into the other markets.
What is Small Firm Growth?
In an Ordinary scenario, growth of a firm is achieved in different levels step-by-step in a small business process (Bosma et al.,2004). A business venture under normal condition encounters three-levels of development process- (I) the Seed level, (ii) the Start-up level and, (iii) the Expansion level.
The Seed level introduce a new well-formulated and thought idea into presence, the idea is screened refined and given a practical point so as to make the venture a feasible one in terms of the situation better off.
The Start-Up level included procurement as well as accumulation of capital from different banking organizations and non-banking organization such as angle investors to give the idea a practical shape and be developed in the real world.
The Expansion level deals with manufacturing or service capacity increment when the business grows the kind of demand generated is more than that of installed capacity hence the expansion is needed in order to bridge the gap between demand and supply.
Where the one author has taken three levels of business development process while the authors (Bridge,O’Neill & Martin, 2013) has suggested four level of small firm growth:
Each level of the business lifecycle inherits certain new or former hurdles.
Stage 1: Existence under the stage One various Challenges are Encountered by the businesses and entrpreneurs such as Profitability issue faced since the inception of the idea, Feasibility of idea in the desired market segment, Fabricating and installing Business designs, Managing the financial clauses and statements etc.
Stage 2: Survival the major Challenges there of are of Managing Monetary Collection, Managing Sales achievable, Managing the financial clauses and statements, Maintaining and Establishing Customer interface, Setting up Market recognition etc.
Stage 3: Success the challenges here are of a little higher magnitude such as Managing Surplus Revenue, Managing Extra Customers, Managing the financial clauses and statements
Robust Management, Market Head-On competition etc.
Stage 4: Take-off and landing the challenges faced here are more of a managerial
Increasing Market Head-On, Managing the financial clauses and statements, Entering into New ventures, Additional fresh Products/Services, Existing Business Expansion etc.
The authors backed the concept of the multiple–level model of various developmental growth levels when the authors performed an extensive analysis. They defined the levels as mentioned below:
The Existence level is quite similar to the previously stated Seed level explained Mukherjee, while the Survival level mentioned is that stage when there are various options in hand open for further growth, the next stage that one can encounter is the Take-off level, in this very stage the owner decides to grow and expand the business venture to capitalize the larger region of market segment i.e. the owner is opting for expansion of one’s business venture. In the last stage i.e. Maturity level the organization will attain that level when it exhibits certain trademark of a profound organization.
In due time, the literati (Naman & Slevin, 1993) came up with a derived inference that, its tedious to be specific in formulating the business development stages, this ambiguity prevails throughout the process (Business aeon). Despite these towering challenges to categorize and measure growth, literati still commonly considers the small firm growth as the major index of accomplishment. Since it is now considered a patois to recommend or to state that success needs growth and if not then it leads to obligation . Large number of literary works are available that represents various theories about rise and proliferation mostly linked with job generation. In yester year’s entrepreneurship came into the light because of its momentous contribution in the domain of generating employment opportunities
Measuring change in Size firm growth should be researched to an extent in depth to understand the analysis of the forecaster take precedence over analysis of the results, i.e., the change in size, this is one of the main factor to measure the firms growth.
Growth as a process measure It refers to growth as an extensive process of organizational alterations, which guides to this change in size and a start to end distance of other changes as well. Even if restricted to one of these individual aspects that guides one’s behavior, growth as know it’s a heterogeneous phenomenon and therefore requires an extensive research.
The Concept of New Firm Success
The study of various measures which are pretient to new firm’s success is part of the most important and intriguing topics in the area of entrepreneurship. Although this area has been under hawk eye observation and studied from various different perspectives to gain insight, no clouser has been derived yet as far as the formulation of success and/or performance from the new business firm prospective is considered. It is moving away from the near possibilities of finding the common juncture or convergence of criteria that helps in scientific progress and uplift Enterprise (Ghobadian & O’Regan, 2006).
Therefore, what should one can refer as accomplishment to in a young business ventures? Formalizing company’s growth is extremely up hill task in every type business but the task is even more tedious when it comes to young business ventures. Young and fresh firms lack historical and past database and many have neither uniform financial norms nor index of performance up till now. Moreover, the firm might still incur losses whilst the sales being on a continus rise in the initial years.(Stuart & Abetti, 1987).
Due to this reason various profound distinguished authors questioned the foundation of success and eventually growth extensively on financial performance parameters. Some authors for example prefers to explain success as a measure of emulous to understand the refered initial time period of a new firm. One of the extreme view points represented through certain inputs and orientation is that the entrepreneurship and small businesses are different and the current performance of the business must be the last indicator to be opted to determine the strength and success of an indicator.
Back in 1992 balanced scorecard was developed by (Kaplan & Norton, 1992) it was basically a tool used to align the business activities with that of the management and its strategic vision and objectives, it creates a balance between the financial measure and non-financial measure and gives a more balanced tool to the manager in order to create a feedback and appraisal which is more robust and provides a practical report which in turn is effective for the firms growth.
The tool uses the financial measures and operational measure basically related to consumer satisfaction (Perspective of Customer, Process Perspective of Business, Perspective for growth). As a matter of fact the balanced scorecard is one of the most acceptaded and most widely used tool in the organizations, be it government or private, non-profit organizations to facilitate organization planning and analyze how to measure the results of what is to be done. Hence, to encounter the redundancy it collects different view points on internal business process and its outcomes to continuously enhance the firms performance outcomes.
Dimensions and Indicators of Success
There are various factors that are paramount towards the success of the businesses like Innovation these Non-financial aspects are sometimes attributed along with the financial aspects, a research (Rhodes & Butler, 2004)
suggested there are 8 different parameters which are attributed to measure the success of the organization of which are related to the business and towards the entrepreneur.
The four that relate to the business are:
Resources of personnel: Relating quality and quantity of people available in the business at the operational and managerial level
Infrastructure Resources: How robust and well buit the Information technology is
Firm Resources: relations with consumers, suppliers and distributors, manufacturing and distribution processes, market share which establishes a place for the business in the marketplace.
Financial Resources: cash and borrowings, bargaining power of the business.
4 Indicators proposed for the entrepreneurs are as follows .
Financial Perspective: Related To Profit, Liquidity, Sales, Income and Profitability
Customer Perspective Customer satisfaction, Number of customers, Loyalty Recommendations etc.
Business Process Perspective: related to the various processes business follows such as manufacturing, distribution, sales and service etc.
Business Volume: the amount of business organization has generated, market share captured.
To determine the success of the organization proper variables should be considered as it happens some variables may focus on aspects which might show the business as successful whereas when other factors are considered the result might not be same (Sapienza et al., 1988) hence, the organization needs to make sure the right kind of variables they think perfectly describe the situation they consider as successful.
To keep the right kind of approach towards the stated issue the management can decide upon the various factors and indicators with a perspective that can clearly define the objective of the firm’s vision and can be used to measure the success in the long term. We can agre that small firms growth is the indicator of the entrepreneurs success but it is just one aspect of it there are various indicators of success, In most of the industries the financial results and performance of the organization are considered as the most trustworthy way of determining the success but it is seen in some of the high technological industries such as Research and development a huge amount of capital is required in the initial stages and the return on investment may be very low or even negative in the initial years thus to tackle with the problem, it was proposed to include non-financial indicators such as product quality, design etc so depending upon the kind of Industry and type of organization indicators might change to determine the successfullness hence right indicators should be selected to determine Entrepreneurs success that just taking firms growth into consideration.
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