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Surviving the venture start:
skills for continued entrepreneurship

               Friederike Welter
    Jönköping International Business School
                                                                www.jibs.se
                                       © Jönköping International Business School
www.jibs.se
© Jönköping International Business School
Crisis reasons in German SMEs (Heinemann
2007)
Management mistakes                                      75,7 % / 165 UN


Low level of bank financing                               44,0 % / 96 UN


Economics or sector reasons                               36,7 % / 80 UN


Orders not calculated properly                            32,6 % / 71 UN


Deficient cost accounting                                 30,7 % / 67 UN


Increasing competition / price pressure
                     -                                    24,3 % / 53 UN


Decreasing demand                                          23,4 % / 51 UN


Too many employees                                         17,9 % / 39 UN


Loss of claims; deficient payment practices               14,2 % / 31 UN


            - .
Lack of re-investments and modernisation                      2,8 % / 6 UN



                                                                       www.jibs.se
                                              © Jönköping International Business School
Typical crisis development




                                                      www.jibs.se
                             © Jönköping International Business School
www.jibs.se
© Jönköping International Business School
Crisis – Manageable for a SME?
• Crisis dynamics:
   – starting as latent process
   – often not perceived as threatening for long time
   – accelerating over time: growing pressure to act during crisis
     process and simultaneously loss of options for actions
   – ambigious outcomes
   – difficult to forecast & to manage
• But: outcome influenced by skills and knowledge of
  management and business owner

                                                                                 www.jibs.se
                                                        © Jönköping International Business School
Four challenges during a business
crisis
•   The entrepreneur
•   The leadership dilemma
•   Involving stakeholders
•   Coping with the stigma of failure




                                                                 www.jibs.se
                                        © Jönköping International Business School
Main support and policy issues

• individual / business level: Does business
  education and entrepreneurship training also
  encompass skills for crisis management?
• Society: Attitudes towards failure?
• Regulatory frame: Does insolvency law allow
  „planned insolvency“ and restart?



                                                                 www.jibs.se
                                        © Jönköping International Business School
Examples of policy initiatives in
Germany
• Two-stage support for entrepreneurs and SMEs during
  early crisis stages
   – Round Tables for SMEs
   – Turnaround support
   – public partnership of KfW and chambers
   http://www.kfw.de/kfw/de/Inlandsfoerderung/Programmuebersicht/Runder_Tisch/index.jsp
   http://www.kfw.de/kfw/de/Inlandsfoerderung/Foerderberater/Unternehmen_erweitern_und_festigen/Qualifizi
   erte_Beratung/Beratung_in_Krisen/index.jsp

• Insolvency reforms aiming to overcome „stigma of
  insolvency“ and to faciliate restructuring of enterprises
   – ESUG – law to faciliate reorganisation of enterprises (2012/13):
   – 2012 draft, amongst others focus on shortening debt proceedings
     (from 6 to 3 yrs)
                                                                                                             www.jibs.se
                                                                                    © Jönköping International Business School

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Iii c - welter surviving the venture start

  • 1. Surviving the venture start: skills for continued entrepreneurship Friederike Welter Jönköping International Business School www.jibs.se © Jönköping International Business School
  • 3. Crisis reasons in German SMEs (Heinemann 2007) Management mistakes 75,7 % / 165 UN Low level of bank financing 44,0 % / 96 UN Economics or sector reasons 36,7 % / 80 UN Orders not calculated properly 32,6 % / 71 UN Deficient cost accounting 30,7 % / 67 UN Increasing competition / price pressure - 24,3 % / 53 UN Decreasing demand 23,4 % / 51 UN Too many employees 17,9 % / 39 UN Loss of claims; deficient payment practices 14,2 % / 31 UN - . Lack of re-investments and modernisation 2,8 % / 6 UN www.jibs.se © Jönköping International Business School
  • 4. Typical crisis development www.jibs.se © Jönköping International Business School
  • 6. Crisis – Manageable for a SME? • Crisis dynamics: – starting as latent process – often not perceived as threatening for long time – accelerating over time: growing pressure to act during crisis process and simultaneously loss of options for actions – ambigious outcomes – difficult to forecast & to manage • But: outcome influenced by skills and knowledge of management and business owner www.jibs.se © Jönköping International Business School
  • 7. Four challenges during a business crisis • The entrepreneur • The leadership dilemma • Involving stakeholders • Coping with the stigma of failure www.jibs.se © Jönköping International Business School
  • 8. Main support and policy issues • individual / business level: Does business education and entrepreneurship training also encompass skills for crisis management? • Society: Attitudes towards failure? • Regulatory frame: Does insolvency law allow „planned insolvency“ and restart? www.jibs.se © Jönköping International Business School
  • 9. Examples of policy initiatives in Germany • Two-stage support for entrepreneurs and SMEs during early crisis stages – Round Tables for SMEs – Turnaround support – public partnership of KfW and chambers http://www.kfw.de/kfw/de/Inlandsfoerderung/Programmuebersicht/Runder_Tisch/index.jsp http://www.kfw.de/kfw/de/Inlandsfoerderung/Foerderberater/Unternehmen_erweitern_und_festigen/Qualifizi erte_Beratung/Beratung_in_Krisen/index.jsp • Insolvency reforms aiming to overcome „stigma of insolvency“ and to faciliate restructuring of enterprises – ESUG – law to faciliate reorganisation of enterprises (2012/13): – 2012 draft, amongst others focus on shortening debt proceedings (from 6 to 3 yrs) www.jibs.se © Jönköping International Business School