chapter 19 planning for change. copyright © houghton mifflin company19-2 overview the contingency...
TRANSCRIPT
Chapter 19
Planning for Change
Copyright © Houghton Mifflin Company 19-2
Overview
• The contingency plan
• The harvest plan
• Dealing with failure: bankruptcy
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The Contingency Plan
• Be prepared for…
– Economic changes
– Taxes and regulations
– Product liability
– Loss of key employees
– Succession planning
– Decline in sales
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Type of Entrepreneur = Type of Harvest or Exit
• Growth entrepreneurs—size matters; rarely leave their ventures
• Habitual entrepreneurs—start and run several, even simultaneously; no exit plan
• Harvest entrepreneurs—start and build for the purpose of selling
• Spiral, or helical, entrepreneurs—try to balance business with personal lives, so start and stop
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The Many Ways to Harvest
• Sell the business
• Cash out but stay in
• Liquidate
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Selling the Business
• If you want to move on
• Know from the beginning that you want to sell– Maintain audited financials– Don’t minimize taxes– Look for a window of opportunity
• You don’t have to sell all the assets– Sale/leaseback
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Entrepreneur
ABC COMPANY
Child
ABC COMPANY
Operations
Entrepreneur
DEF COMPANY
Assets
Lease
Assets
Cashing Out But Staying In
• Selling stock
• Restructuring the business
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More Cashing Out But Staying In
• Phased sale– Sell % interest but control operations– Sell at prearranged price
• Joining a roll-up– Works in a fragmented industry– Entrepreneur’s business purchased
by a consolidator– Entrepreneur may stay on during transition to
a public offering when he is bought out
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Bankruptcy:A Less Than Graceful Exit
• Chapter 11: Reorganization– Business continues to operate– Submits a plan to pay creditors
• Chapter 7: Liquidation– Business does not have resources to
pay creditors– Assets liquidated and creditors paid
from proceeds
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Ways to Avoid Bankruptcy
• Avoid relying on one major customer or industry for revenue generation
• Keep overhead costs to essentials
• Maintain a high degree of liquidity
• Maintain current and honest relationships with bankers, creditors, and suppliers
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Take-Aways
• List what students took away from the discussion in real time