Deck 15: Managing Growing Firms and Exit Strategies

Question 1

Dr.Walter Good at the Asper School of Business at the University of Manitoba believes that serial entrepreneurs are visionaries.

Answer 1

True

Question 2

Small business owners who want to retire or slow down must sell the business.

Answer 2

False

Question 3

Many entrepreneurs consider an initial public offering to be the "holy grail" of their career,even though most do not really understand the process.

Answer 3

True

Question 4

Within the subject of financial acquisitions,MBO refers to management by objectives.

Question 5

For an entrepreneur,exiting a business that has been an integral part of life for some time can be a very emotional experience.

Question 6

Entrepreneurs should think very carefully about their motives for exiting a business and what they plan to do after the harvest.

Question 7

Most entrepreneurs do not understand the initial public offering (IPO)process.

Question 8

Financial acquisition of a firm is a purchase in which the value of the business is based on the stand-alone cash-generating potential of the firm being acquired.

Question 9

As in any exit strategy,the sale of a firm is solely about determining the value of a company.

Question 10

According to the study Managing for Growth; Enabling Sustainable Success in Canadian SMEs by the Queen's School of Business,managers of Canadian SMEs that have the capacity for profitable growth but fail to achieve commercial success often lack the necessary organizational and leadership skills to respond to business challenges.

Question 11

Harvesting is the method entrepreneurs and investors use to grow their firms.

Question 12

Universities are focused on large corporations and provide few,if any,services a small business could use.

Question 13

Free cash flow refers to operating profits plus depreciation less cash taxes and less the investments required to grow the firm.

Question 14

According to the study Managing for Growth; Enabling Sustainable Success in Canadian SMEs by the Queen's School of Business,turnover of key personnel during transition from one growth stage to another is a sign of management problems.

Question 15

A survey of business owners discovered that more than half of them felt a sense of loneliness.

Question 16

An entrepreneur will frequently feel a sense of loss after harvesting the business.

Question 17

While many founders will retain ownership after they "retire," many others will "harvest" the business profits to secure a sound financial retirement.

Question 18

Serial entrepreneurs have great difficulty focusing.

Question 19

One conclusion of the study Managing for Growth; Enabling Sustainable Success in Canadian SMEs,by the Queen's School of Business,is the importance for management to open communication lines with all levels of staff to promote discussion about the evolution and growth of the company.

Question 20

One of the reasons for going public to raise equity capital is to create a liquid market for the company's stock.

Question 21

Bruno has an idea for a new type of hair dryer to add to the salon supplies he sells.Bruno needs financial help to conduct a proper feasibility study to determine if the new dryer can be created and the market potential.Which organization will help Bruno with this study?

A) PEMD loans and grants
B) universities and colleges
C) BDC Consulting
D) National Research Council

Question 22

What realization may cause post-harvest entrepreneurs to become disillusioned?

A) Their sense of identity was associated with the quest for wealth.
B) Their sense of identity was derived from interactions with employees.
C) Their sense of identity was intertwined with their business.
D) Their sense of identity does not return after joining in social or charitable work.

Question 23

Which statement is drawn from the Managing for Growth study on succession?

A) Ownership should be passed to the next generation as soon as they complete their post-secondary education.
B) Owners should not look for a clone of themselves to carry on the business.
C) Training candidates in the corporate culture will inhibit the probability of employee and customer acceptance.
D) Establish general guidelines for performance for a year after succession.

Question 24

What does exiting or harvesting encompass?

A) selling and leaving a business
B) creating future options
C) establishing a benchmark for firm risk
D) capturing future profitability

Question 25

Which of the following applies to the IPO process?

A) exhilarating,frustrating,and exhausting
B) frustrating,tempting,and exhausting
C) tempting,exhausting,and exhilarating
D) encouraging and nerve-racking

Question 26

According to an Inc.survey,how much time did CEOs who participated in public offerings spend on those offerings (on average)?

A) 14 hours per week over three and a half months
B) 21 hours per week over three and a half months
C) 33 hours per week over four and a half months
D) 47 hours per week over four and a half months

Question 27

Katie has a concept for a new commercial cooling system but needs engineering expertise which she cannot afford.What organization should Katie approach for this expertise?

A) PEMD loans and grants
B) universities and colleges
C) BDC Consulting
D) National Research Council

Question 28

From the owner's perspective,what would be considered an advantage of harvesting by withdrawing cash flows from the firm?

A) retaining control
B) preserving cash for later reinvestment
C) obtaining greater latitude in seeking out a buyer for the firm
D) increasing long-term returns from the business

Question 29

What type of conflict do many entrepreneurs experience after harvesting?

A) financial
B) practical
C) emotional
D) tactical

Question 30

How do the primary motivations of the issuing firm and the investment banker compare in an IPO?

A) they are the same-maximizing the price of the firm
B) they are similar-completing the sale
C) they are very different because they are compensated for different outcomes
D) they are impossible to know,since every deal is structured differently

Question 31

Clara's cupcake shop has stayed at the same level of sales for three years despite efforts to grow.What might be a reason for Clara's lack of growth?

A) keeping cash in the business
B) delegating decisions to senior staff
C) poor record keeping
D) evaluating the competition

Question 32

Gayle is marketing her business to investors.She has a great elevator pitch; she knows the exact amount of capital required and the profit potential of her company.What else will investors want to know before investing in Gayle's business?

A) type of culture Gayle will create
B) Gayle's exit strategy
C) level of benefits Gayle will offer employees
D) assurance that a safety committee will be created

Question 33

Elizabeth's ski wear business has its first profitable year.How should Elizabeth manage the growth of the business?

A) make a plan for new products,markets,and infrastructure
B) study the competition to mimic their every move
C) begin adding layers of management in anticipation of growth
D) keep doing what she is doing and the growth will come

Question 34

How is an employee ownership plan useful?

A) as a way for a business founder to build his/her position in the company
B) as a way to motivate employees toward higher performance levels
C) as a harvest method of choice
D) as a way to ease investor concerns

Question 35

Thomas is a visionary and has a track record of getting new ventures over the hump of start-up and moving them toward continued growth and success.Once the business is rolling he moves on to another start-up.What kind of entrepreneur is Thomas?

A) start-up
B) visionary
C) serial
D) short-term

Question 36

Shane is negotiating the sale of his business whereby he can stay on as a consultant to maintain some rewards from his hard work.What is this called?

A) retiring
B) selling out
C) harvesting
D) diversifying

Question 37

Lars often feels alone in his business.His employees cannot understand the level of pressure when he has to make decisions that could impact the livelihood of the business.According to studies of business owners,what does Lars need?

A) simplified market
B) outside assistance
C) more empathetic employees
D) more stable home life

Question 38

Marcia writes cheques to herself and three other partners of a company in equal amounts that add up to the balance in the company's bank account.What is this activity likely part of?

A) harvest strategy
B) dividend distribution
C) payroll
D) expense reimbursement

Question 39

How can having publicly traded stock be beneficial to owners?

A) as a source of cash flow
B) as protection against an unwanted harvest
C) for insight into how to improve the performance of the firm
D) as justification for refusing requests for ESOP options

Question 40

How do strategic buyers evaluate acquisition candidates?

A) on the stand-alone,cash-generating potential of a target business
B) on the synergies they think the target business will create
C) on the potential of the target business to preserve employment
D) on the quality of the business strategy of the target firm

Question 41

According to Lisa D.Stein,vice-president of Salomon Smith Barney,what are the most important reasons for going public?

Question 42

Why do you think some entrepreneurs prefer not to grow their business too large or too quickly?

Question 43

What are the three types of transactions in selling a business?

A) strategic,financial,and employee acquisitions
B) financial,employee,and internal acquisitions
C) strategic,internal,and financial acquisitions
D) internal,external,and complex acquisitions

Question 44

What are the personal issues an entrepreneur will face in post-harvest life?

Question 45

List a few of the outside sources of management assistance.

Question 46

List the three basic types of acquisitions and identify the purpose of each.

Question 47

How can going public be beneficial to a firm?

A) provides cash flows necessary to grow the business
B) avoids becoming a takeover target in the future
C) erects a shield against the fluctuations of the stock market
D) offers better compensation packages to attract superior management talent

Question 48

Mitch plans to retire in 5 to 10 years from his success car dealership.He has decided to retain ownership for now,but will no longer grow the business.This change would also allow him to invest for retirement some of the cash that the business is now generating.Which harvesting method is Mitch using?

A) delaying sellout
B) releasing the firm's free cash flows to the owners
C) offering stock to the public through an IPO
D) issuing a private placement of stock

Question 49

Ken accepts an invitation to attend a luncheon to meet other insurance agents from across the country to discuss trends and develop opportunities for new and joint business.What is this called?

A) networking
B) politicking
C) instrumental tying
D) effective connecting

Question 50

Identify and describe five of the eight areas the Queen's School of Business study identified in which successful SMEs must perform well.Why do you think each of these areas is important?

Question 51

Anthony's cyber security company has grown quickly.Anthony begins to create a proper organizational chart and a board of advisors.What is Anthony doing?

A) creating external networks and market connectivity
B) planning for succession and exit
C) professionalizing the business infrastructure
D) maintaining organizational culture and values

Question 52

Explain what it means to "harvest" a business.

Question 53

List and briefly explain the five basic harvest strategies for the small business.

Question 54

The Queen's study of over 800 businesses ended with nine recommendations to help entrepreneurs manage transition from start-up through high growth to sustainability.Describe five of these recommendations and explain why you think they are important.

Question 55

Which key question must an entrepreneur address in anticipation of post-harvest life?

A) How can I increase my passion for the harvest process?
B) Will I experience serious regrets over the decision to harvest my investment in the company?
C) Will I still be respected as a leader in the company?
D) What will my legacy be within the company?

Question 56

Explain three key issues that a succession plan would need to address.