Entre chapter 6

walkaway

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

advantages

Clean slate Up to date technology Do it your way

replacement value

The cost to acquire an essentially identical asset.

book value

The difference between the original acquisition cost and the amount of accumulated depreciation.

five paths to business ownership

The entrepreneur started a completely new business. Purchased franchise rights to an existing business. Bought an already operating business. Worked in a small business and eventually gained ownership. Inherited a business from a family member.

due diligence

The process of investigating a business to determine its value and potential for investment.

buy out

The purchase of substantially all of an existing business

buy in

The purchase of substantially less than 100 percent of a business.

takeover

The seizing of control of a business by purchasing its stock to be able to select the board of directors. (hostile invent)

brokers

advertise and facilitate the sale of businesses for a fee, usually a percentage of the ultimate selling price.

synergy

A combination in which the whole is greater than the sum of its component parts

Heuristic

A commonsense rule; a rule of thumb.

workout

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

start-up

A new business that is started from scratch. Most common way small business occur

serial entrepreneur

A person who opens multiple businesses throughout his or her career.

franchise

A prepackaged business bought, rented, or leased from a company called a franchisor.

trade name franchising

An agreement that provides to the franchisee only the rights to use the franchisor's trade name and/or trademarks.

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.

bankruptcy

An extreme form of business termination that uses a legal method for closing a business and paying off creditors when debts are substantially greater than assets.

intangibles

Assets, such as patents or trademarks, and liabilities, such as accounts payable, that have no physical existence.

Sole Proprietorship and partnership

In practice, partnerships can continue in existence despite a change in ownership. Sole proprietorships cannot.

example of franchise

McDonald's, which has over 30,000 restaurants in more than 100 countries

disadvantages

No initial name recognition Significant amount of time Hard to finance Revolving credit Loose experience with management and workers

regulation

Unlike residential real estate, which is highly regulated in the United States, sellers of businesses are not legally required to make disclosures of impairments or deficiencies. If you are outside the United States, your laws may be different. For example, in Canada, sales of businesses for a price less than $200,000 are tightly regulated. Sales for amounts greater than $200,000 are not regulated at all.

family business

When the founder dies the business will most likely fail afterwards Fewer than 30 percent are successfully transferred to a second generation. Fewer than 13 percent succeed long enough to be inherited by the third. Rather than waiting for the founder to die, you should assist in completing a comprehensive estate-planning process while the founder is still healthy and in charge

caveat emptor

let the buyer beware