Transcript Chapter 20: Achieving Success in the Small Business

Achieving
Success
in the Small
Business
Chapter 20
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Learning Objectives
LO1 Recognize the stages of the small business life
cycle.
LO2 Consider the impact of the product life cycle.
LO3 Understand the options for harvesting or
closing the small business.
LO4 Know the firm-level critical success factors for
small business.
LO5 Understand what success means with the
quadruple bottom line.
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20-2
Small Business Life Cycle
Business life cycle
 The sequence or pattern of developmental
stages any business goes through during its life
span.
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20-3
The Small Firm Life Cycle
Figure 20.1
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Life Cycle Stages
Emergence
Resource
Maturity
Success
Existence
Survival
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Small Business Life Cycle
Liability of newness
 The set of risks faced by firms early in their life
cycles that comes from a lack of knowledge by
the owners about the business they are in and by
customers about the new business.
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Small Business Life Cycle
Slack resources
 Profits that are
available to be used
to satisfy the
preferences of the
owner in how the
business is run.
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Avoiding Customer Complacency
Recency
Frequency
Potency
Recommendation
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20-8
The Product Life Cycle
Figure 20.2
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Service Life Cycle
Figure 20.3
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
20-10
The Hierarchy of
Business Outcomes
Figure 20.3
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Closing the Small Business
Harvest
 Recover value through a sale of a firm or its
assets.
Initial public offering (IPO)
 Transfer method describing the first-time public
sale of a stock listed on a public stock exchange.
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Closing the Small Business
Consolidation
 A transfer method in which a small business is
bought by a larger firm for the purpose of quickly
growing the larger firm.
Employee stock ownership plan
 A formalized legal method to transfer some or all
of the ownership of a business to its employees.
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20-13
Closing the Small Business
Transfer
 An endgame
strategy in which
ownership is moved
from one person or
group to another.
Termination
 An endgame
strategy in which
the owner closes
down a business
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20-14
Closing the Small Business
Liquidity enhancement
 An estate planning strategy which focuses on
generating cash to cover likely estate taxes.
Tax management
 An estate planning strategy which focuses on
minimizing estate tax payments.
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Closing the Small Business
Estate freeze
 An estate planning strategy which focuses on
transferring assets to heirs when the asset costs
are low.
Walkaways
 Business terminations in which the entrepreneur
ends the business with its obligations met.
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20-16
Closing the Small Business
Bankruptcy
 An extreme form of business termination which
uses a legal method for closing a business and
paying off creditors when debts are substantially
greater than assets.
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20-17
Closing the Small Business
Workout
 A form of business termination in which the
firm’s legal or financial obligations are not fully
met at closing.
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20-18
Closing the Small Business
Reorganization
 The popular name for a Chapter 13 bankruptcy in
which a bankrupt firm continues to operate
while paying off debts identified by the
bankruptcy trustee
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20-19
Closing the Small Business
Liquidation
 The popular name for a Chapter 7 bankruptcy in
which a bankrupt firm’s assets are sold by the
bankruptcy trustee and the proceeds used to pay
the firm’s debts.
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Closing the Small Business
Serial entrepreneurs
 People who open
multiple businesses
throughout their
career.
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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The Not-So-Secret Secrets of Success
Critical Success Factors fall into two broad
types:
Outside help
Entrepreneurial experience.
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Critical Success Factors
Being incorporated
Employees
Extreme start-up capital
Protectable intellectual property
Brand name affiliations or partners
Optimal strategies
Presales
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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The Four Bottom Lines
Table 20.1
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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