Chapter 20

Traditional small business

A firm intended to provide a living income to the owner, and operating in a manner and on a schedule consistent with other firms in the industry and market.

High-performing small business

A firm intended to provide the owner with a high income through sales or profits superior to those of the traditional small business.

High-growth venture

A firm started with the intent of eventually going public, following the pattern of growth and operations of a big business.

Workout

A form of business termination in which the firm's legal or financial obligations are not fully met at closing.

Employee Stock Ownership Plan

A formalized legal method to transfer some or all of the ownership of a business to its employees.

Lifestyle or part-time firm

A small business primarily intended to provide partial or subsistence financial support for the existing lifestyle of the owner, most often through operations that fit the owner's schedule and way of working.

Consolidation

A transfer method in which a small business is bought by a larger firm for the purpose of quickly growing the larger firm.

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

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.

Estate Freeze

An estate planning strategy which focuses on transferring assets to heirs when the asset costs are low.

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.

Walkaways

Business terminations in which the entrepreneur ends the business with its obligations met.

Emergence

Life Cycle: Stage 1

Existence

Life Cycle: Stage 2

Survival

Life Cycle: Stage 3

Success

Life Cycle: Stage 4

Resource Maturity

Life Cycle: Stage 5

Critical Success Factors fall into two broad types

Outside help Entrepreneurial experience.

Slack Resources

Profits that are available to be used to satisfy the preferences of the owner in how the business is run.

Harvest

Recover value through a sale of a firm or its assets.

Supplemental Profits

Returns above costs intended as a secondary income for entrepreneurs (where self-employment is secondary to their main job).

Success Profits

Returns at levels higher than the entrepreneur could make working for others.

Substitution Profits

Returns intended to equal and replace the salary or wages the entrepreneur could draw working for someone else.

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

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.

Business Life Cycle

The sequence or pattern of developmental stages any business goes through during its life span.

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.

Initial public offering (IPO)

Transfer method describing the first-time public sale of a stock listed on a public stock exchange.

What is the type of business termination in which the firm's legal or financial obligations are not fully met at closing?

Workout