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MGT602 - Entrepreneurship - Lecture Handout 39

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PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT
DECISIONS (Continued….)

RECRUITING AND HIRING NEW EMPLOYEES

The entrepreneur will generally need to establish procedures and criteria for hiring new employees.

Advertising in local newspapers and referrals from friends and associates is most effective for entry-level positions. For senior management the most effective strategy is networking with friends and business associates. Personnel agencies may also be considered if there are no other effective options.

Once resumes have been collected some basis of determining each candidate’s strengths should be made.

Some criteria must be used in the resume evaluation. Factors such as education, prior experience, entrepreneurial activities, and interests can be used to assess candidates. From the initial screening of resumes, a few candidates can be invited in for an interview. Most firms use an interview form with critical factors listed for evaluating the interview candidates. The goal should be to hire not only the best candidate but also someone who will perform well in the entrepreneurial environment and provide a long-term solution to the available position.

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MGT602 - Entrepreneurship - Lecture Handout 28

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THE ORGANIZATIONAL PLAN (Continued ….)

Transferability of Interest

  • Each of the forms of business offers different advantages as to the transferability of interest.
  • In a proprietorship, the entrepreneur has the right to sell any assets.
  • In the limited partnership, the limited partners can sell their interests at any time without consent of the general partners. A general partner cannot sell any interest unless specified in the partnership agreement.
  • In a corporation shareholders may transfer their shares at any time.
  • In the S Corporation, the transfer of interest can occur only as long as the buyer is an individual.

Capital Requirements

The need for capital during the early months can become one of the most critical factors in keeping a new venture alive.

  • For a proprietorship, any new capital can only come from loans or by additional personal contributions. Often an entrepreneur will take a second mortgage as a source of capital. Any borrowing from an outside investor may require giving up some equity. Failure to make payments can result in foreclosure and liquidation of the business.
  • In the partnership, loans may be obtained from banks or additional funds may be contributed by each partner, but both methods require change in the partnership agreement.
  • In the corporation, new capital can be raised by: