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Entrepreneurship Chap 14

Entrepreneurship Chap 14






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    Entrepreneurship Chap 14 Entrepreneurship Chap 14 Presentation Transcript

    • Harvesting and Exiting the Venture Sell the Business Chapter 14
    • Presentation Outline • Personal Reasons for Selling • Business Reasons for Selling • Determine the Company’s Valuation • Determine Best Candidates • Tax Considerations: What Method is Best for the Seller • Determine Best Candidates
    • Personal Reasons for Selling • Investors Are Forcing You to Become Liquid • Cash-in from Entrepreneur • Disagreements • Acceptable Unsolicited Offer • Business - Burn Out • Personal Event • Poor Health
    • Business Reasons for Selling • Requires Significant Capital for Growth • New Competition • Limited Opportunity • Close to Closing • Market Condition Forecasts
    • Determine the Company’s Valuation • Valuation Based on Financial Evaluation • Strategic Marketing Value
    • Determine Best Candidates • Strategic Buyers – Competitors – Related Businesses – Manufacturers of Related Products – Companies with Announced Acquisition Plans • Financial Buyers – Management - ESOP – Related Businesses – High Net Worth Individuals
    • Tax Considerations: What Method is Best for the Seller • Stock for Stock • Cash for Stock • Installment Transaction
    • Double Taxation • Asset Sales - Corp. Tax + Stockholder Tax
    • Financial Up-to-Date • Maintain the Finances on a Consistent Monthly P & L and Cash Flow Basis
    • Prepare 3-Year Projections • by Month Actual Account Plus Future Accounts • by Actual Product Plus New Products • by Region and/or by Store
    • Know Why You Are Selling the Company • Strategic Reasons • Growth Exceeded Management Capabilities • Diversify Net Worth • Other Interests • Getting Older - Illness - Divorce • Owner Disagreements • Investors Desire to Liquidate
    • Things to Do While Running the Business • Keep Term Liability Agreements Short – Leases - 2 to 3 Years with Options to Renew – Distributor Agreements - Short Term Cancellation – Supplier Agreements - Cancel at Your Option or in 30 - 60 Days • Keep Term Asset Type Agreements Longer – Employee Non-Compete Agreements – License and Royalty Agreements – Sales Agreements with Price Escalation • All Agreements Must Be Assignable
    • A Model for Running the Business • Develop a Prestigious Customer List • Keep a Well-Maintained Facility • Show a Continuous Growth in Sales and Profits • Develop Propriety Assets – Patents, Copyrights, Trademarks – Process Know How: Formulations and Documentation • Develop a Well-Respected Sales Distribution Channel • In General, Do Things That Others Will Value Much Higher Than Your Cost to Create Them
    • The Actual Process of Selling (Average Time from Beginning to Closing is Up to One Year) • Develop a List of Candidates – Choose a group of strategic buyers • Try to Play the Role of a “Reluctant Suitor” – Have Others Make Initial Contacts – Investment Bankers - Consultants - Brokers, etc. • Get More Than One Serious Candidate – Use Competitive Negotiation Strategies – Let All Candidates Know Others Are Interested – Negotiate An Equitable Sales Price And Related Issues
    • The Actual Process of Selling (Average Time from Beginning to Closing is Up to One Year) • Select One Candidate – Develop A Letter of Intent A) All Equity Issues Described “How Much” B) A Period of Due Diligence - 15 to 60 Days • Negotiate a Definitive Agreement of Sale • Closing