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Entrepreneurship

Explore diverse exit strategies for entrepreneurs including selling to insiders, leveraging buyouts, employee ownership plans, and IPOs. Learn valuation techniques, negotiation tactics, and the importance of long-term planning for a successful transition.

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Entrepreneurship

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  1. Entrepreneurship Exit Strategies for Entrepreneurs: The Concluding Act 13

  2. “It’s interesting to leave a place…. Leaving reminds us of what we can part with and what we can’t, then offers us something to look forward to, to dream about.” --Richard Ford

  3. Sell or transfer ownership to insiders Sell or transfer ownership to outsiders Take the company public through an IPO Exit Strategies

  4. Sale or Transfer to Insiders • Succession • Leveraged buyout • Employee stock ownership plan

  5. All In the Family • Share power • Form a limited partnership • Set up a trust

  6. Affective commitment Normative commitment Calculative commitment Imperative commitment Commitment in the Family Business

  7. Managers borrow money to pay the owner an agreed-upon price. The new owners pledge their stock as collateral, or… Lenders accept an equity position in the company to cover part or all of the funds. Leveraged Buyouts

  8. Employee Stock Ownership • Ordinary ESOP • Leveraged plan • Transfer ownership plan

  9. Sell at the right stage Sell when the business cycle is strong Compensate for loss of talent Identify and protect intellectual property Adopt transparent and conservative accounting policies Resolve open questions that make it difficult to estimate value Selling to Outsiders

  10. What’s It Worth? • Balance sheet methods • Earnings methods • Market method

  11. Balance sheet method Net worth = Assets – Liabilities Adjusted balance sheet method Estimates market value of assets Balance Sheet Methods

  12. Excess earnings method Capitalized earnings method Discounted future earnings method Earnings Methods

  13. Market value or price-earnings approach Comparing the price-earnings ratio of the business to that of other publicly traded companies in the same industry Market Method

  14. New equity capital Liquidity Market provides continuing valuation of worth Prestige and recognition Personal wealth Benefits of IPOs

  15. Disadvantages of IPOs • Loss of control • Disclosure • Sarbanes-Oxley Act • Expense

  16. Prepare for listing day Prepare documentation Distribution exercise and road show Flow information to stock analysts and investors Steps to Going Public

  17. Choosing an underwriter Timing Government requirements for registration of shares, prospectus Aftermarket support Other Considerations

  18. Payroll taxes not paid promptly Suppliers demand payment in cash Growing volume of customer complaints Loans refused Unsystematic or lax financial management Lacking materials to meet orders Large discounts to secure orders Sudden departure of key people Bankruptcy Warning Signs

  19. Ethical Beginning with an extreme initial offer Unethical “Big lie” technique Convincing the other side that you have an “out” Bargaining Tactics

  20. Reaching Integrative Agreements • Broadening the pie • Nonspecific compensation • Logrolling • Cost-cutting • Bridging

  21. Physical appearance and energy Cognition and memory Intelligence Creativity Changes Over Time

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