The Questions Every Entrepreneur Must Answer

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what are my goals} Do I have the right strategy^ Can I execute the strategy I

The Questions Every Entrepreneur
by Amar Bhide
Of the hundreds of thousands of husiness ventures that entrepreneurs launch every year, many never get off the ground. Others fizzle after spectacular rocket starts. A six-year-old condiment company has attracted loyal custoiners but has achieved less than $500,000 in sales. The company's gross margitis can't cover its overhead or provide adequate incomes for the founder and the family members who participate in the business. Additional growth will require a huge capital infusion, but investors and potential buyers aren't keen on srnall, rnarginally profitable ventures, and the family has exhausted its resources. Another young company, profitable and growing rapidly, imports novelty products from the Far , p^ , , 1 1 1 growth has forced him to reinvest most of his profits to finance the business's growing inventories and receivables. Furthermore, the company's profitability has attracted competitors and tempted customers to deal directly with the Asian suppliers. If the founder doesn't do something soon, the husiness will evaporate. Like most entrepreneurs, the condiment rnakcr and the novelty itnportcr get plenty of confusitig counsel: Diversify your product line. Stick to your knitting. Raise capital by selling equity. Don't risk losing control just because things arc bad. Delegate. Act decisively. Hire a professional manager. Watch your fixed costs. Why all the conflicting advice? Because the range of options-and problems-that founders of young businesses confront is vast. The tnanager of a mature company might

1 he problems entrepreneurs COnirOnt every day would

^^k, what business are we in? or
How can we exploit our core compe-

overwhelm most managers.
East and sells thetn to large U.S. chain stores. The founder, who has a paper net worth of several million dollars, has been nominated for entrepreneurof-the-year awards. But tbe company's spectacular 120

^cndcs? Entrepreneurs must continually ask tbemselves what business they want to be in and what capabilities they would like to develop. Sitiiilarly, the organizational weaknesses and imperfections that entrepreneurs confront every day would cause the managers of a mature company to panic. Many young enterprises simultaneously lack coherent strategies, competitive HARVARD BUSINESS REVIEW November-December iy96

strengths, talented employees, adequate controls, and clear reporting relationships. The entrepreneur can tackle only one or two opportunities and prohlems at a time. Therefore, just as a parent should focus more on a toddler's motor skills than on his or her social skills, the entrepreneur tnust distinguish critical issues frotii normal growing pains. Entrepreneurs cannot expect the sort of guidance and cotnfort that an authoritative child-rearing hook can offer parents. Human beings pass through physiological and psychological stages in a more or less predetermined order, but companies do not sbare a developmental path. Microsoft, Lotus, WordPerfect, and Itituit, although cotnpeting in the satne industry, did not evolve in the same way. Each of those companies has its own story to tell about tbe development of strategy and organizational structures atid about tbe evolution of the founder's role in the enterprise. The options that are appropriate for one entrepreneurial venture may he cotnplctely inappropriate for another. Entrepreneurs rnust make a hewildering number of decisions, and they tiiust make the decisions that are right for thctn. The framework I present here and the accompanying rules of thumb will help entrepreneurs analyze the situations in HARVARD BUSINESS REVIEW November-Deeember 1996

which they find themselves, establish priorities amotig the opportunities and problems they face, and make rational decisions about the future. This framework, which is based on my observation of...
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