A Mature Café (Scenario)
Sarah has been operating and growing her café in an upscale neighbourhood for almost five years. She is happy with how the business has continued to increase in revenues as her customer base has become loyal over the years. She has just over 30 employees, two of whom are managers.
The lease on the space is coming up for renewal and this has brought up the notion of leaving the business and exploring other interests she has in travelling through Africa and Southeast Asia. Sarah has worked hard and she wants to be sure she gets as much out of the business as she put into it.
Another factor is the increasing competition in the area and the sinking feeling she has that it will be next to impossible to differentiate her business from the big chains opening on several street corners. Her fear is that her sales may have plateaued and there in fact will be a decrease in sales in the near future.
-She is at the point of seriously considering ________ in hopes to capitalize financially on the investment in her cafe.

Question

Quizplus · Accepted Answer

Harvesting refers to a strategy in which an entrepreneur extracts value from a business by cutting costs, increasing profit margins, and selling assets, without necessarily reinvesting those profits back into the business. Given Sarah's desire to explore other interests and her concerns about increasing competition, harvesting may be the best option for her to maximize the financial return on her investment in the café. She can focus on streamlining operations and reducing expenses to generate more profit, while also selling any assets that are no longer necessary for the business. This strategy can allow her to exit the business on a high note, with a significant return on her investment. Merging, refinancing, or diversifying may not be the best options for Sarah given her current situation.