Distribution of entrepreneurial risk - Milan Krajnc
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If the organization and the success of a company do not grow evenly, the company will start an organizational crisis first and then a financial crisis.

In such a company, a thorough analysis must first be carried out. With their help we get to the bottom of the cause of the crisis. Then the general goal of the company is determined. When the analysis has shown that several activities are equivalent and that it is a pity to abandon them, it is advisable to use more legal entities. The most common phenomenon is the transformation into a holding company.

Starting a company is always the most difficult, although we have a very precise goal of what we would do, the management and the struggle for survival force us to “reach for every job”. Since we do not reach the goal overnight, the direction of the company is slowly “diluted”. Thus, after a few years of operation, the company no longer has a main activity, the public is known for something other than what

Distribution of entrepreneurial risk - Milan Krajnc

is written as a goal, the employees do not know what their task is. If the director recognizes this in time, the company must be reorganized, if not, it may go under.

After the analysis, when defining the general goal of the company, it can be completely new or returned to its original state. Which in practice happens very rarely.

The entrepreneurs who founded the company have already grown personally during this period and have different expectations of life. Further reorganization also depends on the goal and the results of the analysis. The main goal is to determine the main activity.

The analysis can show that there are several equivalent activities in the company, that the employees have potential that the company has not yet used, or that the company has developed a high profile in a certain “circle”. Of course, the analysis can also show poor results, and in the end it is best if the company’s story ends with this one and continues with another.

Distribution of entrepreneurial risk - Milan Krajnc

The goal we set ourselves is first and foremost the personal goal of the entrepreneur, what he wants to achieve with the company. An entrepreneur may want to keep the company for his descendants, want to close the business, do business for pleasure only, in short, the goal must come from the owner, who must not be a “prisoner” of the company.

If the analysis has shown that several activities are equivalent and that it is a pity to give them up, it is advisable to make more legal entities. The most common phenomenon is the transformation into a holding company. This means that the existing company takes over the task of managing the assets and capital of the newly established companies. At the same time it takes care of the brand. Newly established companies adopt the name of the parent company and an appendix illustrating their activities.

Thus, some companies concentrate exclusively on production or services, while other companies offer them support in the areas of administration, marketing and purchasing. At the same time they offer their services on the market. In this way, the entrepreneur diversified his capital and reduced the risks. At the same time, he has increased confidence in the company’s employees, which contributes to the creation of value in the respective company.

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In such a case, the entrepreneur-owner has to withdraw from the operative business of the company and take over only one function. It is recommended that he takes a leading role and deals primarily with asset management, but of course only if he has received additional training in this direction, otherwise he should appoint an independent director or hand over the management with full powers to his successor. If, however, he is an expert in a particular field and it is a pity to lose this knowledge, he will devote himself solely to this work and the management should be entrusted entirely to the director. In any case, he must be trained in capital management, because as owner he will continue to have a stake in the company.

The advantages of splitting the activities into several companies are mainly in terms of operational hygiene, a better overview of the operational processes, greater independence and responsibility of the employees, diversification of capital, lower risk and increased quality of the profession.
The disadvantages of splitting the activities are higher administrative costs, creation of competition, less control over the directors (depending on the organization).

Avtor - Milan Krajnc

Author of the article: Milan Krajnc, pedagogue, entrepreneur & crisis manager
I teach you to look “at yourself” as a third person. For more information or an introductory meeting, write to me at official@milankrajnc.com

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