W3_Folakemi_Institutionalization of Small Businesses

1.      Problem recognition, definition and evaluation

A group of four entrepreneurs providing business development services to clients are interested in expanding their businesses. They want to have better structures, stronger client base and increased revenue. They are considering various expansion options that could help them to form a stronger and bigger company with a better brand and services to clients.

2.      Development of the feasible alternatives

The objective of the individual businesses is to reduce cost, improve brand image, improve structure and also increase revenue. They are considering the following available alternatives:

• Continue to operate as individual small businesses and invest some money in marketing, branding and governance structure 
• Collaborate on specific projects in order to achieve the desired objectives
• Combination of the businesses through a merger with the objective of achieving improved structure, brand and more revenue.

3.      Development of the outcomes for each alternative

An analysis of the alternatives above produced the following result:

4.      Selection of criteria

Discussions amongst the entrepreneurs revealed that the most important objectives of the individual businesses are to have a better structure, a stronger brand and increased revenue. These businesses have not been able to achieve these by working alone as individual entrepreneurs. For these entrepreneurs, 100% ownership of the business is not as important as increased revenue.

5.      Analysis and comparison of the alternatives

The most important measures of success for the individual entrepreneurs are the financial measures i.e. increased revenue and reduced cost. An improved brand image and stronger governance structure will significantly contribute to the achievement of increased revenue. Of the three alternatives analyzed above, a business combination would give the best opportunity for increased revenue as the businesses will have the opportunity to offer more products and services to bigger clients. The brand image would also improve and a joint marketing effort is likely to produce better results.

6.      Selection of the preferred alternative

Based on the analysis done in step 3 above, the most preferred alternative in achieving stronger brand, structure and increased revenue is the business combination. It would be easier for the new business with a stronger brand to set up a board of directors, assign specific management roles to each share holder, market a stronger brand and also bid for bigger jobs. The following is a list of the 3 alternatives from most preferred to least preferred.

a.      Business Combination

b.      Project Collaboration

c.       Individual Businesses

7.      Performance Monitoring & Post Evaluation of Result

A business combination will be suggested to the entrepreneurs. Further work would be done on risk analysis and management for the proposed new company. Monitoring procedures will also be put in place, including periodic reviews of financial and non-financial performance.

8.      References

1. Business Owner’s Toolkit. (2012). Business Combinations and Other Sources of Venture Capital. Retrieved from http://www.bizfilings.com/toolkit/sbg/finance/getting-financing/venture-capital-business-combinations.aspx
2. Purdue OWL APA style. (2011). APA formatting and style guide. Retrieved from http://owl.english.purdue.edu/owl/resource/560/19/
3.  Giammalvo, P. (2012, October 22). Integrated portfolio (asset), program (operations) and project management methodology course (cost engineering) slides (An AACE methodology course). Lagos, Nigeria: Lonadek