Chapter 20

Tax Management

An estate planning strategy focusing on minimizing estate tax payments. A transfer.

Take-off Stage

Rare situation when small business' success stage leads to takeoff rather than resource maturity.

Harvest

Recover value through sale of assets. Ultimate goal is to get the largest return possible on your firm. This is their last major return and a key form of funding for their retirement or formation of a new business.

Supplemental Profits

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

Workouts

The business is terminated and not all obligations are met. Accounts for half of business closing, roughly one million. Arrangements are made to pay off creditors. Payment schedule negotiations are a good way.

Stage 4 of Product life Cycle: Decline

This comes from introduction of new products, shifts in customer preferences, Once permanent decline begins it can be fast or slow. (Steady or unsteady )

GRAT

Grantor retained annuity trusts. Type of estate freeze.

success profits

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

Existence Stage

The time when the business is in operation but not yet stable in terms of markets, operations, or finances. This is the second riskiest stage.

Auditing the four bottom line requires specifying what?

goal, the metric, and the achievement level.

Mergers and acquisitions

one frim combines or absorbs the other through a purchase.

Challenges of Take-off

understanding the nature and demands of growth, and getting control over it.

Learning Objectives:

1. Recognize the stages of the small business life cycle. 2. Consider the impact of the product life cycle. 3. Understand the options for harvesting of closing the small business. 4. Know the firm-Level critical success factors for small business. 5. Understand what success means with the quadruple bottom line.

Consolidation

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

Recommendation

A way to help your customers by providing a memorable way to show that you think about, understand, and care about your customers and their business. It is a powerful way to get help and advice and this will help customers see you as experts in certain areas of business.

Product life cycle Stage 2: Growth

Acceptance of the product (imitative or innovative) increases rapidly. Prices tend to drop as production becomes more efficient and competition increases.

Goals in closing a business (successful walk-away)

All bills paid, All taxes paid , Contracts, leases and the like are fulfilled or formally terminated, Employees are let go as the find other jobs, Assets or inventory are depleted, No lawsuits consuming money and time, Customers placed so the get needed goods or service, and insurance is continued to cover unexpected claims after the firm closes.

Liquidity Enhancements

An estate planning strategy which focuses on generating cash to cover likely estate taxes. A transfer.

Resource Maturity Stage

At this stage functional areas, the market and the products and services are all being dealt with consistently and efficiently/ Characterized by a stable level of sales and profits over several years. The challenge of maturity is to avoid complacency.

Going from entrepreneurial thinking to action is done in which two techniques?

BRIE Method from chapter 1 and the Part-time method to lay a foundation for future full time action

Recency

Be among the people your customers have in the past few days. Through magnetic business cards on their file cabinet, a phone call or email to ensure their needs are being satisfied and a thank you note saying you appreciate their business.

Marketing Standpoint

Consumers are aware, and know how it will make their life better. Fly off the shelf during this stage. Advertising and promotion not as crucial but keeping up with production and ensuring good distribution become more critical.

Resolution to Liability of Newness

Get expertise as quickly as possible form an expert rather than try to learn yourself. Developing an extensive social network is essential.

Service Life-cycle

Go through the stages of introduction, growth, maturity, and decline but it can be easier to extend life because services can are easier to change on the run. Can add or change items of your service, change service levels, add additional services, revamp a website, and otherwise modify your service bundle quicker than manufacturers.

Maturity Stage product expectancies

Price competition rises, and manufacturers find ways to cut costs or introduce new features to keep or gain market share. Smart companies have new features and products in a pipeline ready for commercialization and distribution during these times.

Slack Resources

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

Substitution Profits

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

For high-growth businesses the success stage is a chance to catch their breath and lay groundwork for the period of takeoff.

TRUE

the business life cycle

The sequence or pattern of developmental stages any business goes through during its lifespan. Like every person a small business is unique but still goes through this predictable growth process.

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.

Frequency

To make recency work you have to stay in touch with your customers on a frequent basis. This might be quarterly or monthly basis if the customer buys only a few times a year, but can be daily depending on the frequency as well. ALL forms of contact count with this.

IPO (initial public offering)

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

Emergence Stage

When a person thinks about and takes actions toward starting a firm. More people think about it than actually take steps. This is the riskiest stage.

Potency

a message that is one that is remembered and remembered for the right reasons. Don't get caught up trying to be funny in your advertising or communications if it outshines and makes the customer forget the core of your message.

Techniques to bolster sales during maturity are?

advertisements, promotions (coupons), and companies reposition brands to appeal to new markets

Marketing Goal

maximize market share and keep ahead of competitors. Trying to get into all the markets nationally and internationally.

what are worst business outcomes?

termination

measuring success with 4 bottom-lines

the firm, community, family, and yourself

what are best business outcomes?

transfers

Managing Take-off

working extensively with potential sources of funding and other key resources, as well as working with markets outside and employees within the firm. Also relearning the processes that led to this level of success, as a growth-oriented firm often needs to do things differently from one content with maintaining a stable state.

Success Stage

Success stage shows consistent growth in financial performance, usually with slowly rising sales. This is done through developing the information, skills, and routines to grow the businesses processes.

Reorganizatoin

A bankrupt firm continues to operate while paying off debts identified by the bankruptcy trustee. Debt is renegotiated and some is forgiven if a set portion is paid at a certain time.

Employee stock ownership plan

A formalized legal method to transfer some or all of the ownership of a business to its employees. Tax protected way to sell a firm to its employees.

Characteristics of Decline

Sales and profits begin to fall. Ads and promotion expenses eliminated, companies pare back product lines and don't market to less profitable segments in order to cut costs and squeeze as much profit out of final stages as possible.

Product Life Cycle Stage 3: Maturity

Sales level off and profits follow suit. But both should be at fairly high levels. Keeping both at high level is the challenge of the small business. May need to take customers from competitors or "leftovers" from competitors leaving the market.

Product life cycle stage 1: Introduction

Small business can only afford to launch a product on a small scale. Sales are low and profits are not likely when a product emerges into the market. For all marketing money being sent, the risks form competition in the intro stage are generally low since most competitors will wait to see if your product is a threat.