1. PowerPoint Presentation by Charlie Cook
The University of West Alabama
Part IV
Growth Strategies for
Entrepreneurial Ventures
C H A P T E R 15
© 2009 South-Western, a part of Cengage Learning.
All rights reserved.
Harvesting the
Entrepreneurial
Venture

2. © 2009 South-Western, a part of Cengage Learning. All rights reserved. 15–2
Harvesting the Venture:Harvesting the Venture:
A Focus on the FutureA Focus on the Future
• Eventual success of ventureEventual success of venture  decision concerning future operationsdecision concerning future operations
and management of the business.and management of the business.
• Harvest PlanHarvest Plan
 Defines how and when the owners and investors will realize an actual cash returnDefines how and when the owners and investors will realize an actual cash return
on their investment.on their investment.
 Not mean challenges & responsibility of entrepreneur is over (challengingNot mean challenges & responsibility of entrepreneur is over (challenging
decision).decision).
• Reasons for HarvestingReasons for Harvesting
 To maintain managerial control and succession for successful continuedTo maintain managerial control and succession for successful continued
operations.operations.
 To initiate a “liquidity event” that will generate a significant amount of cash for theTo initiate a “liquidity event” that will generate a significant amount of cash for the
investors.investors.
 An IPO (initial public offering) has become a reality.An IPO (initial public offering) has become a reality.

Most realistic opportunity is sale of the businessMost realistic opportunity is sale of the business..

3. 15–3
The Management Succession StrategyThe Management Succession Strategy
• Privately owned businessPrivately owned business lack of preparation for passinglack of preparation for passing
managerial control to next generation.managerial control to next generation.
• Management Succession (owner designate which heir will inheritManagement Succession (owner designate which heir will inherit
operations/ train one of them to take over business during founder’soperations/ train one of them to take over business during founder’s
lifetime)lifetime)
 Is the transition of managerial decision making in firm, is one ofIs the transition of managerial decision making in firm, is one of
the greatest challenges confronting owners and entrepreneurs inthe greatest challenges confronting owners and entrepreneurs in
privately held businesses.privately held businesses.
 One of major problem is ownerOne of major problem is owner  business, individual'sbusiness, individual's
personality and talents make operations what it is. Owner maypersonality and talents make operations what it is. Owner may
not want to be removed. Sibling rivalry, family members’ fear ofnot want to be removed. Sibling rivalry, family members’ fear of
losing status, dislike death for fear of loss.losing status, dislike death for fear of loss.

4. © 2009 South-Western, a part of Cengage Learning. All rights reserved. 15–4
Table
15.1 Barriers to Succession Planning in Privately Held
Businesses
Source: Manfred F. R. Kets de Vries, “The Dynamics of Family-Controlled Firms:
The Good News and the Bad News,” Organizational Dynamics (winter 1993): 68.
Founder/Owner Family
Death anxiety
• Company as a symbol
• Loss of identity
Concern about legacy
• Dilemma of choice
• Fiction of equality
Generational envy
• Loss of power
Death as taboo
• Discussion is a hostile act
• Fear of loss/abandonment
Fear of sibling rivalry
Change of spouse’s position

5. Figure
15.1 Pressures and Interests in a Family Business
Inside the Family Outside the Family
Family Managers are employees Non-family Employees
Inside the
Firm/
Business
Family members are able to
manage – result is wanting to get or
increase control over operations
Pressure on the owner- manager to
designate an heir-selection of family
members as managers
Rivalry among various branches of
family
Pressure on the owner- manager
to protect personal interests.
Rewards for loyalty
Stake in the company, sharing of
equity, growth, and success –
critical to entrepreneur's
success.
The Family- not play active role in
business
Nonfamily Elements (external
environmental factors)
Outside the
Firm/
Business
Income and inheritance of part of
operations. Getting involved in
business (hire them).
Resist additional personnel or
specific expertise.
Competition change strategy,
pressure to adjust. Customers,
technology, new product
development. Tax laws,
regulatory agencies, trends in
management practices,.

6. © 2009 South-Western, a part of Cengage Learning. All rights reserved. 15–6
Key Factors in SuccessionKey Factors in Succession
• Forcing EventsForcing Events
 Happenings that cause theHappenings that cause the
replacement of the owner-replacement of the owner-
manager:manager:
• DeathDeath
• IllnessIllness
• Mental or psychologicalMental or psychological
breakdownbreakdown
• Abrupt departureAbrupt departure
• Legal problemsLegal problems
• Severe business declineSevere business decline
• Financial difficultiesFinancial difficulties
• Pressures and InterestsPressures and Interests
inside the Firminside the Firm
 Family membersFamily members
 Nonfamily employeesNonfamily employees
• Pressures and InterestsPressures and Interests
outside the Firmoutside the Firm
 Family membersFamily members
 Nonfamily elementsNonfamily elements

7. © 2009 South-Western, a part of Cengage Learning. All rights reserved. 15–7
Sources of SuccessionSources of Succession
• Major Questions:Major Questions:
 Inside or outside successor?Inside or outside successor?
 Which entry strategy will be implemented?Which entry strategy will be implemented?
 How will power be transferred?How will power be transferred?
 Can the successor to gain credibility with the firm’sCan the successor to gain credibility with the firm’s
employees?employees?
• Types of SuccessorsTypes of Successors
 Entrepreneurial successorEntrepreneurial successor
 Managerial successorManagerial successor
 Interim specialistInterim specialist

8. © 2009 South-Western, a part of Cengage Learning. All rights reserved. 15–8
Developing a Succession StrategyDeveloping a Succession Strategy
TimeTime
Type of VentureType of Venture
Entrepreneur’s
Vision
Entrepreneur’s
Vision
Capabilities of
Managers
Capabilities of
Managers
Environmental
Factors
Environmental
Factors
Understanding
the Contextual
Aspects

9. © 2009 South-Western, a part of Cengage Learning. All rights reserved. 15–9
Identifying Successor QualitiesIdentifying Successor Qualities
• Sufficient knowledge of theSufficient knowledge of the
businessbusiness
• Fundamental honesty andFundamental honesty and
capabilitycapability
• Good health; energy, alertness,Good health; energy, alertness,
and perceptionand perception
• Enthusiasm about theEnthusiasm about the
enterpriseenterprise
• Personality compatible with thePersonality compatible with the
businessbusiness
• High degree of perseveranceHigh degree of perseverance
• Stability and maturityStability and maturity
• Reasonable amount ofReasonable amount of
aggressivenessaggressiveness
• Thoroughness and a properThoroughness and a proper
respect for detailrespect for detail
• Problem-solving abilityProblem-solving ability
• ResourcefulnessResourcefulness
• Ability to plan and organizeAbility to plan and organize
• Talent to develop peopleTalent to develop people
• Personality of a starter and aPersonality of a starter and a
finisher; and appropriatefinisher; and appropriate
agreement with the owner’sagreement with the owner’s
philosophy about the business.philosophy about the business.

10. © 2009 South-Western, a part of Cengage Learning. All rights reserved. 15–10
The Exit Strategy: Liquidity EventsThe Exit Strategy: Liquidity Events
• Entrepreneurs consider selling their venture forEntrepreneurs consider selling their venture for
numerous reasons:numerous reasons:
 Boredom and burnoutBoredom and burnout
 Lack of operating and growth capitalLack of operating and growth capital
 No heirs to leave the business toNo heirs to leave the business to
 Desire for liquidityDesire for liquidity
 Aging and health problemsAging and health problems
 Desire to pursue other interestsDesire to pursue other interests