Entrepreneurship Theory Process Practice

An exit strategy is defined as that component of the business plan where an entrepreneur describes a method by which investors can realize a tangible return on their investment.

A managerial successor provides the critical ideas for new-product development and future ventures.

It is not necessary for the entrepreneur to seek professional advice and legal counsel when liquidating the firm.

The Oakland Scavenger Company case may have a major effect on the management succession plans of family business.

Depending on the situation, some qualities or characteristics a successor should possess are more important than others.

Only 10 percent of all privately held enterprises make it to a third generation.

The steps in developing a succession strategy are understanding the contextual aspects, identifying successor qualities, and developing a written succession plan.

Family members who do not play an active role in the business may still want to inherit part of the business.

The liquidity event can be achieved through an initial public offering (IPO) or complete sale of the venture.

The prospectus for an initial public offering (IPO) must disclose fully all pertinent information about a company and must present a fair representation of the firm's true prospects.

A buy/sell agreement can be used to make certain that funds are available to purchase the ownership interest.

Only 3 out of 10 privately held firms survive into a second generation.

Nonfamily employees sometimes put pressure on the owner/manager in an effort to protect their personal interests.

The basic rule for privately held businesses is this: The owner should develop a succession plan.

The forcing events that require an entrepreneur to step aside and let someone direct the operation are usually unforeseen and create major problems for the business.

Nepotism policies are lawful unless they have an "adverse impact" on women or minority groups (as in the Oakland Scavenger Company case).

Timing considerations generally do not impact decisions to sell a business because triggering events are unanticipated.

Sometimes a successor is needed because the business environment changes and a parallel change is needed at the top.

The harvest decision may come when the venture has grown to a stage where an initial public offering (IPO) is a possibility.

When looking ahead in choosing a successor from inside the organization, the founder often trains a team of executive managers consisting of both family and nonfamily members.