Ending the Venture Ending The Venture Sesi 11 J0692 by linzhengnd


									Ending The Venture

              Sesi 11

    J0692 - Entrepreneurship
• Management of Succession
• Other Exit Barrier

              J0692 - Entrepreneurship
   Bankruptcy’s Lessons
A. Overextension To Markets
B. Protects From Creditors Not
C. Entrepreneur = Business
D. Recognize Failure Too Late
E. Emotionally Painful

               J0692 - Entrepreneurship
• Least Severe Alternative- “Breathing Room”
• Cash Flow Problems Can Be Overcome
• Plan Prepared & Approved By Court
 –Extension- Postpone Claims
 –Substitution- Exchange Something For Debt
 –Composition- Prorated Settlement

                 J0692 - Entrepreneurship
      Bankruptcy Survival
Bargaining Chip- Restructure And Reorganize
File Before Failure Of Cash Or Revenue
Chapter 11- Only If Chance Of Recovery
Examination Of Transactions For Fraud
Maintain Good Records
Understand Completely
Transfer Litigation To Bankruptcy Court
Realistic Reorganization Plan

                  J0692 - Entrepreneurship
          Extended Payment
• Budgets Future Income To Outstanding Debt
• Payment Of All Priority Claims

                 J0692 - Entrepreneurship
• Secured Creditors            • Contributions To
• Administrative                 Benefit Plans
  Expense                      • Claims Of Consumer
• Claims From
                               • Taxes
                               • General Creditors
• Wage Claims

                 J0692 - Entrepreneurship
• Voluntary vs. Involuntary
• Involuntary Requirements
 –Debts Not Being Paid When
  Due (1 – 3 Creditors)
 –Custodian Appointed
 –Fair Value Of Assets < Debts
  (Balance Sheet Test)
               J0692 - Entrepreneurship
     Bankruptcy Trustee
• Elected By Creditors- Interim Appointed
  By Court
• Becomes Owner Of All Nonexempt
• Can Set Aside Petitions
• Transfers Property To Creditor

                J0692 - Entrepreneurship
         Strategy During
• Prepare Plan
• Sell Plan
• Communicate
• No Checks That Can’t Be Covered

             J0692 - Entrepreneurship
   Reducing Risk Of Failure
Avoid Excess Optimism
Prepare Good Marketing Plan
Make Good Cash Projections
Keep Abreast Of Market
Identify Business Stress Points

                J0692 - Entrepreneurship
   Bankruptcy Warning Signs
Financial Management Lax        Bank Wants Subordination
Inability To                    Key Personnel Leave
 Document/Explain                Lack Of Materials
 Transactions                    Unpaid Taxes
Large Discounts To Speed        Demand For Cash
 Up Cash Flow                     Payment
Contracts Below Standard        Customer Complaints
 Amounts                          Increase

                   J0692 - Entrepreneurship
         Failure Reality
• Consult with Family/Friends
• Seek Outside Assistance
• Drop Venture That Is
 Draining Resources

               J0692 - Entrepreneurship
  Succession Planning Issues
• Senior Management
  Committed To Plan

• Well-Defined Job Descriptions

• Open Process

                 J0692 - Entrepreneurship
• Direct Sale
• Employee Stock Option
 –2-3 Year Plan to Sell To Employees
 –Create Trust Fund
• Management Buy-Out- Based On
  Value Of Goodwill & Asset Appraisal

               J0692 - Entrepreneurship

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