Chapter 15 HARVESTING THE ENTREPRENEURIAL VENTURE
The average life expectancy of a privately held firm is a. 24 years. b. 10 years. c. and indefinite number of years. d. 50 years.
a. 24 years.
One advantage of the delayed-entry strategy for the younger generation succeeding the older generation of a family business is that a. a successor's skills are judged with greater objectivity. b. strong relationships are readily established. c. normal mistakes are viewed as incompetence. d. knowledge of the environment is limited.
a. a successor's skills are judged with greater objectivity.
Which is an influencing factor in succession? a. family and business cultural issues b. government regulation c. current economic conditions d. the competition
a. family and business cultural issues
A type of successor who is interested in efficiency, internal control, and effective use of resources would be considered a(n) a. managerial successor. b. entrepreneurial successor. c. opportunistic successor. d. family successor.
a. managerial successor.
10. An exit strategy is defined as that component of the business plan where an entrepreneur describes a method by which investors can realize a tangible return on their investment.
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3. The harvest decision may come when the venture has grown to a stage where an IPO is a possibility.
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4. There are two types of succession pressures: family and nonfamily.
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5. Nonfamily members sometimes bring pressure on the owner-manager in an effort to protect their personal interests.
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6. 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.
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8. The steps in developing a succession strategy are understanding the contextual aspects, identifying successor qualities, and carrying out the succession plan.
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9. The liquidity event stands for positioning the venture for the realization of a cash return for the owners and investors.
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A harvest plan defines how and when the owners and investors will realize an actual cash return on their investment.
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Research on family firms demonstrates which of the following facts? a. only 16 percent make it to a third generation b. many family firms cease to exist after one month c. only nine out of ten make it to a second generation d. only 3 percent make it to the next generation
a. only 16 percent make it to a third generation
Which of the following is not a contextual aspect to be considered in an effective succession plan? a. technology b. time c. environmental factors d. type of venture
a. technology
Which of the following steps should be carried out third when deciding to sell a business? a. Publicize the offer to sell. b. Value the business. c. Finalize the prospective buyers. d. Time the sale appropriately.
b. Value the business.
The Oakland Scavenger case is profound to owners of family businesses in that a. conceivably, the owner can be sued for not giving equal treatment to a son as to a daughter. 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. c. conceivably, the owner can be sued for not declaring a family member his or her successor. d. the owner can be fined for not declaring his or her first son the heir to the business.
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.
A harvest plan a. is similar to a will. b. defines when and how business owners will realize a cash return on investment. c. leaves the business to the next generation. d. is simple to implement.
b. defines when and how business owners will realize a cash return on investment.
"Harvest" does not mean a. family members agree about the business. b. that any profits will be reaped. c. that the firm continues to exist. d. the challenges and responsibilities of the entrepreneur are over.
d. the challenges and responsibilities of the entrepreneur are over.
A type of successor who is high in ingenuity, creativity, and drive would be considered a(n) a. managerial successor. b. entrepreneurial successor. c. opportunistic successor. d. all of the above.
b. entrepreneurial successor.
A typical example of a forcing event is a. death. b. a natural disaster. c. an IRS audit. d. a slow business year.
a. death.
Which of the following is not an example of pressures or interests from within a firm that affect succession issues? a. rivalry among various branches of the family b. pressure from a family member to start his/her own business c. employee wanting a percentage of the business in the owner's will d. pressure on the owner/manager to designate an heir
b. pressure from a family member to start his/her own business
Succession pressure inside the firm exists a. when the founder wants to give up authority. b. when family members want to keep and manage the business. c. nonfamily employees don't want the business. d. competition-is hurting the business.
b. when family members want to keep and manage the business.
One advantage of an early-entry strategy for the younger generation succeeding the older generation of a family business is a. normal mistakes are viewed as incompetence. b. perspective of the environment is broadened. c. successor's skills are judged with more objectivity. d. skills specifically required by the business are developed.
d. skills specifically required by the business are developed.