As per Module 6, Section 3, please refer to the following NY Times
As per Module 6, Section 3, please refer to the following NY Times
article, “Selling a Business Involves More Than Money” (July 15,2016) and comment as to sale/succession and exit strategy dynamics. You may provide personal experience as examples, as well.
BMGT330:Entrepreneurship and New Venture PlanningModule 6: Management and Exit StrategiesSection 3: Exit StrategiesOverviewSmall business owners traditionally started a business believing it would be a lifetimeoccupation. The entrepreneur would open a business, and attempt to increase it to a size that wasstill manageable. If the business was successful, the owner would manage the business untilretirement, at which time it would be sold or handed over to a descendent. The business wasoften not considered an investment, a tangible asset that can be valued and sold.Modern entrepreneurs are of a different breed. They often establish a business with the expresspurpose of growing it to a given size over a period of time, and then cashing out, or exiting, witha significant gain. Other entrepreneurs find that they are skilled in establishing and growing acompany, but not in running it (that is, they are not managerial in nature). These entrepreneurswant to sell their company, and use the profits to establish a new venture. Still others burn outfrom the pressure and, sitting on a large piece of equity, consider it opportune to cash out. Thereare, of course, entrepreneurs who, in spite of good ideas and sound plans, are not meeting salesand profit expectations, and are thus being urged by investors to sell out to bring in better talent.Finally, there are entrepreneurs who want to retire and turn the business over to their children ortheir partners. In each case, a sound strategy for valuing the business and for exiting and/orsuccession must be instituted.Section 3: Exit StrategiesObjectivesAfter completing section 3, you should be able to:discuss the key elements of an effective management succession plandescribe the motivations of the buyers of a businessanalyze the risks associated with accepting a promissory note (providing seller take-backfinancing) for a large portion of the business at the time of salediscuss the merits of employee stock ownership plans (ESOPs)
Section 3: Exit StrategiesLecture OutlineI.Management succession and family businessesA. about 90 percent of all U.S. businesses are considered family businesses, yet morethan two-thirds of first-generation businesses fail to survive during secondgeneration ownershipB. almost 80 percent of family business founders intend to pass the business on totheir children, but only about one-third actually doC. critical qualities for a successful family business, consisting of a team of familybusiness consultants include:1.shared values about people, work, and money2.shared power in that each family member contributes talents and abilities,and respects the talents and abilities of the other family members3.traditions that promote positive values (for example, reputation forintegrity)4.willingness to learn and grow in anticipation of succession by the nextgeneration5.shared family time and concern for one anotherD. a successful transfer to the next generation depends on an effective managementsuccession plan1.successors should be chosen on merit and interest, rather than on birthorder2.selection of a successor should be made known3.the successor should be groomed according to the founder’s vision andgoals, ongoing operations, and key clients and suppliersa.patient mentoring is importantb.reasonable expectations and goals should be established4.successful succession is ultimately premised on trust and respect
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