06 MAY’ 19

Chapter 13

Planning the Future

11-May-19
©2016 Pearson Education
 Succession Planning
• Succession planning acknowledges that staff will not be with
an organization indefinitely and it provides a plan and process
for addressing the changes that will occur when they leave.

• Whenever size and resources permit, a succession plan should

involve nurturing and developing employees from within an
organization. Employees who are perceived to have the skills,
knowledge, qualities, experience and the desire can be
groomed to move up to fill specific, key positions.

©2016 Pearson Education

 Why is Succession Planning
important
• A continuing supply of qualified, motivated people (or a
process to identify them), who are prepared to take over when
current senior staff and other key employees leave the
organization.

• A commitment to developing career paths for employees

which will facilitate your organization's ability to recruit and
retain top-performing employee.

• A message to your employees that they are valuable.

©2016 Pearson Education

 Challenges
• Size of the organization: some nonprofits have so few
positions that they may not have the ability to offer
opportunities for advancement.
• Lack of financial resources.
• In some cases, senior leaders are staying on in their positions,
despite the fact that the skills needed for the job may have
changed.
• Inadequate training and development resulting in an employee
who is not prepared for a promotion.

©2016 Pearson Education

 Harvest Strategy
• Just like farmers, venture capitalists seed, tend, and feed
portfolio companies in the hopes of reaping a bountiful
harvest.”

• The professional entrepreneurs and investors know that

harvesting an entrepreneurial venture is the approach taken by
the owners and investors to realize terminal after-tax cash
flows on their investment.

©2016 Pearson Education

 Harvest…
• Investors will shy away from ventures that do not have an exit
strategy because it may be an indicator that the entrepreneur is
more interested in building and running a lifestyle business
rather than in building a potential high-growth venture.

©2016 Pearson Education

 Steps in Harvesting
• First, you need to determine the personal goals of the lead
entrepreneur and the venture team. For each, what defines success for
this venture activity?
• Second, research and understand what options are available, and try to
plan and fit the options to the venture, and likewise the venture to the
options.
• Next, with a strong, clear vision that will get you through the tough,
challenging seas that lie ahead, go build and grow the venture. Make it
happen.
• Be patient, because it will take at least five years and as long as seven
to ten years.
• Periodically conduct a formal, realistic valuation of the venture that
includes a refreshed list of potential buyers, investors, strategic
partners, and even professional service providers.
©2016 Pearson Education
 Exit Strategies
• An exit strategy is a means of leaving one's current situation,
either after a predetermined objective has been achieved,
justifying premises or decision makers for any given
operational planning changed substantially, or as a strategy to
mitigate imminent or possible failure.

• A business exit strategy is an entrepreneur's strategic plan to

sell his or her ownership in a company to investors or another
company. An exit strategy gives a business owner a way to
reduce or liquidate his stake in a business and, if the business
is successful, make a substantial profit. If the business is not
successful, an exit strategy (or "exit plan") enables the
entrepreneur to limit losses.
©2016 Pearson Education
 Exit Strategies
• Initial Public Offering (IPO)
• Private Sale of Stock
• Merger with another company
• Acquisition
• Liquidation

©2016 Pearson Education

 IPO
• In an IPO, you sell a portion of your company in the public
markets. You and your management team typically remain in
place for a period of years, your investors and managers may
be able to sell some stock, and your company continues to
operate much as it has in the past.

©2016 Pearson Education

 Private Sale of Stock
• Option of passing ownership to another true believer who will
preserve your legacy. Interested parties might include
customers, employees, children or other family members.

• Of course, the buyer needn't come from outside. You can also
sell your business to current employees or managers. Often in
this kind of sale, the seller finances the sale and lets the buyer
pay it off over time.

©2016 Pearson Education

 Merger
• This normally means merging with a similar company, or
being bought by a larger company. This is a win-win situation
when bordering companies have complementary skills, and
can save resources by combining. For bigger companies, it’s a
more efficient and quicker way to grow their revenue than
creating new products organically.

©2016 Pearson Education

 Acquisition
• In a strategic acquisition, another company purchases your
business, either with cash or stock in the acquiring company or
with some combination of stock and cash.

• The acquirer may or may not retain you and your management
team, and may or may not make substantial changes in your
company's operations, staff, and business lines.

©2016 Pearson Education

 Liquidation
• One exit strategy is simply to call it quits,
close the business doors, and call it a day.

• If you liquidate, however, any proceeds from

the assets must be used to repay creditors. The
remainder gets divided among the
shareholders--if there are other shareholders,
you want to make sure they get their due.

©2016 Pearson Education