ENT 396 CH.15
TRUE
The steps in developing a succession strategy are understanding the contextual aspects, identifying successor qualities, and carrying out the succession plan.
Happenings that cause the replacement of the owner
manager of a family business are called-B.Forcing events
TRUE
A harvest plan defines how and when the owners and investors will realize an actual cash return on their investment.
The average life expectancy of a privately held firm is
A. 24 years
An entrepreneurial successor is someone who is high in
A.ingenuity, creativity, and drive
Which of the following is an event that would require the entrepreneur to step aside and let someone else direct the operation?
A.non-terminal physical incapacitation
Research on family firms demonstrates which of the following facts?
A.only 16% make it to a third generation
One advantage of the delayed entry strategy for the younger generation succeeding the older generation of a family business is
A.successor's skills are judged with greater objectivity.
Besides the eight steps in the harvest strategy, the other implications the entrepreneur should be aware of when selling out are
A.tax implications arising from the sale of a business.
Outside help should be considered when
A.the entrepreneur's ego gets in the way of a succession plan
The entrepreneur may have to choose a successor with potential in developing attributes necessary to run the business. Which of the following should be taken into account?
A.the successor's drive and resourcefulness
TRUE
Although family members may not play an active role in the business, they still may want to inherit part of the business.
FALSE
An entrepreneurial successor is someone who is interested in efficiency and the effective use of resources.
Which of the following is a true statement about legal advice?
C.It is seldom crucial for legal advisors to design a plan for succession.
Which of the following steps should be carried out second when deciding to sell a business?
C.Segregate the assets.
FALSE
If the successor and the business environment have a "right fit," the successor will be minimally effective.
FALSE
It is not necessary for the entrepreneur to seek outside advice when liquidating the firm.
TRUE
The liquidity event stands for positioning the venture for the realization of a cash return for the owners and investors.
Which of the following is not a step in developing a succession strategy?
C. Forcing events
TRUE
The harvest decision may come when the venture has grown to a stage where an IPO is a possibility.
Which of the following is not a contextual aspect to be considered in an effective succession plan?
A.Technology
Which of the following steps should be carried out third when deciding to sell a business?
B.Value the business.
The Oakland Scavenger case is profound to owners of family businesses in that
B.conceivably, the owner can be sued by an employee of a different ethnic origin based upon not being accorded the same treatment as a son or daughter.
The Oakland Scavenger Company case resulted in
C.an $8 million out of court settlement.
Barriers to successful succession planning include which of the following?
C.dilemma of choice.
When selling a business all of the following is good advice except:
C.the owner should sell when profits are low.
The first source of succession often is
C.Family and in-house personnel
Which of the following is a true statement about the characteristics that successors should possess?
D.Some characteristics will be more important than others, depending on the situation.
One advantage of an early entry strategy for the younger generation succeeding the older generation of a family business is
D.skills specifically required by the business are developed.
"Harvest" does not mean
D.the challenges and responsibilities of the entrepreneur are over.
TRUE
Depending on the situation, some qualities or characteristics a successor should possess are more important than others
FALSE
External environmental factors do not have any effect on the succession issue.
FALSE
Once the decision is made to harvest the business, the way forward is easy.
FALSE
When the founder of a business is willing to share authority, succession problems can be maximized.
A reason for an entrepreneur to sell a venture is
A.Boredom
A typical example of a forcing event is
A.Death
Each of the following are non-family elements under pressure and interest from outside the firm except
A.Increased insurance rates
Most privately held firms
A.Lack a succession plan
Which of the following is not considered a step in the harvest strategy?
A.Look for new venture to open up.
There are four strategies that can be used in preparing a management succession policy. Which of the following is not one of these strategies?
A.The owner has the family control the management continuity strategy entirely.
One of the most recent legal challenges to management succession has charged
A.employment discrimination.
Which is an influencing factor in succession?
A.family and business cultural issues
Which of the following is not a suggestion a tax accountant or lawyer might make concerning tax reduction?
B.Increase management's salaries and fringe benefits.
Which of the following is a key aspect to be considered in an effective succession?
A.the entrepreneur's vision
FALSE
An important issue in the Oakland Scavenger case is that of whether non-family members should be allowed to be successors in family businesses.
When considering financial difficulties, which of the following statements constitutes a forcing event?
B.A lender demands the removal of the owner-manager before lending the necessary funds.
Meeting with the potential buyers
B.helps to negotiate the major requirements.
A written succession strategy
B.prepares the entrepreneur for developing a management continuity strategy and policy
Which of the following is not an example of pressures or interests from within a firm that are considered in the succession issue?
B.pressure from a family member to start his/her own business
A succession pressure inside the firm exists
B.when family members want to keep and manage the business.
One of the most recent legal challenges to management succession has come from the
C. Oakland Scavenger Company case
The idea of selling out should be viewed in
C.a positive sense
The managerial successor typically is not interested in
D.Creativity
TRUE
When looking ahead in choosing a successor from inside the organization, the founder often trains a team of executive managers consisting of both family and non-family members.
TRUE
There are two types of succession pressures: family and non-family.
Promotion from within is
C.a morale-building philosophy.
Research shows that many privately held firms go out of business within
D.10 years
A harvest plan
B.defines when and how the owners will realize a cash return on investment.
A type of successor who is high in ingenuity, creativity, and drive would be considered a(n)
B.entrepreneurial successor.
Which of the following is not a contextual aspect to be considered in an effective succession plan?
D.Cost
TRUE
Some entrepreneurs are easy to replace, and some cannot be replaced.
TRUE
Non-family members sometimes bring pressure on the owner-manager in an effort to protect their personal interests.
TRUE
The liquidity event can be achieved through an IPO or selling out.
TRUE
Only one-third of all enterprises makes it to a second generation
TRUE
The Oakland Scavenger case may have a major effect on the management succession plans of family business.
TRUE
The forcing events that require an entrepreneur to step aside and let someone direct the operation are usually unforeseen and create major problems for the business.
A type of successor who is interested in efficiency, internal control, and effective use of resources would be considered a(n)
A.Managerial successor
Which of the following steps should be carried out last, when deciding to sell a business?
A.Publicize the offer to sell.
FALSE
Only one percent of all enterprises makes it to a third generation.
TRUE
The basic rule for privately held businesses is this: The owner should develop a succession plan.