Harvesting the Venture

Harvesting
Harvesting or Exiting speaks to the reaping of the value of a venture by the Entrepreneur as
he/she makes a departure from the business. It is the last step in the Entrepreneurial Process. For
some, it an event that is planned for, but for many, it is unexpected and is spurred on by the
occurrence of particular incidents.

An Entrepreneur must have a Harvesting Strategy that is planned beforehand, just like the other
stages of the Entrepreneurial Process. This will allow the Entrepreneur to know exactly when
he/she will reap. It should be at the point where the Entrepreneur believes that any additional
costs incurred will bring in revenue that is less than that being gained currently. It will be the
point where the business is at its maximum. However, Harvesting involves more than money. It
has both financial aspects and non - financial aspects. The Entrepreneur must consider the
lifestyle that he/she will have after an exit is made.
.
Robert Price in an article entitled "Why is an Exit Strategy Important for Entrepreneurs?'', felt
that a Harvesting Plan helps in defining the success of the venture and that investors would shy
away from ventures that did not have one. He went on to that the right strategy protects
wealth, attracts quality employees and ensures a smooth transition.

Thinos
c
to Consider when Planning for Harvesting•
Decide what defines Success for your enterpnse
Seek advice on how to Harvest the venture
Know and evaluate the various strategy options as they relate to your business
Decide the-point at which the Harvesfing will _occur . .
Decide on what you want the value of the busmess to be at the pomt of exit
Make the Harvesting Plan visible to those concerned
Create a good track record by managing the business well
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 Prepare for Change (e.g. of culture if !he Entrepreneur remains in the business or for a
change in lifestyle on departing the busmess ).

What Creates Value for the Ventur~? d hen the entity's Return on Capital Employed is
Moore et al (2008) shared that Value 18 create w · me factors that create value:
in excess of the Opportunity Cost of Funds. Here are so

o Quantity of customers
0
o Quality of c~tomers
Human Capital of the(br~d loyaltyhni),
business (tee ca1skills , management competencies etc.)
o Infra Structure of business .
o Capital resources in a business (equipment, machmezy)
o Ability to generate a healthy Cash Flow
o Intellectual Property
o Production: processes
o Ability to make Super Profits
o Geographical location
o Financial leverage ...
0 Buyers' expectation of future performance capab1hties
o Strength of Suppliers

Harvesting Strategies
Harvesting Strategy Description
Licensing of Rights
Advantages
This is permission given to
The business that gives the
another company by a
license, gains from the
business, to produce its
operations of a well operated
product in return for a regular
payment. The company system. It is a way of adding
receives the right to use the another dimension to a
intellectual property of the business that will cause it to
business.
grow.
Family Succession The venture is transferred to an
able family member or group It ensures that tradition, culture
of family members. A plan and values are preserved. The
must be made so that the Entrepreneur will also have the
transition is smooth. It must benefit of keeping close to the
clearly indicate the new status business.
(responsibilities, share of
ownership etc.) of those to
come. · · ··
Go Public (IPO)
Some of the shares of a Private
*initial public offering It is a good way to raise large
Limited Company are issued to
the public. The shares are amounts of capital as the
80 shares can be issued to the
 traded on the Stock Exchange.
Employee Share Ownership Employees are offered the
I Plan (ESOP) opportunity to purchase stocks
I of the business
Liquidate (Shut Down) This is the process of selling
the assets of the business and
Venture
paying creditors. The
remainder of funds go to
shareholders. A specific order
of distribution must be
followed as there are various
types of creditors and
shareholders.
The business is sold by the
Sale of Venture
Entrepreneur(s), most times in
return for cash.
The shares are bought by the
Management Buy-Out
management team of the
(MBO)
company from the founding
Entrepreneur. They become
significant shareholders in the
business.
world at large. It creates a
ready market for the sale and
purchase of shares. It signals to
investors that the business is a
good one.
It creates an incentive for
workers to work harder as they
are a part of the ownership of
the business.
This is a good option for the
business when it is insolvent.
The Priority for distribution
list is made by law and so iliere
is no uncertainty regarding
this.
It gives the owner(s) quick
cash. It is not an attractive exit
strategy for owner(s) who want
to continue with the company
or for those who want gradual
release of ownership.
The business continues under
the leadership of persons who
know and understand the
business. There must be a
change in the mentality of the
managers (from employees to
owners).

The Entrepreneurship is joined The Entrepreneurship can have

Mergers and Acquisitions access to the expertise and
to another company when
there is a merger. With an other critical resources of
acquisition, the another business. This
Entrepreneurship buys strategically changes their
majority shares in another position_ in_the market; giving
them a stronger presence.
company.
This is the incorporation of a This allows the business to
Absorption of New Concept new business concept into the innovate in order to satisfy
irito Mainstream Operation core operations of a business, customers.
in a way that gives the
business added value.

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