Upload
madison-gorin
View
229
Download
6
Tags:
Embed Size (px)
Citation preview
J0692 - Entrepreneurship
Ending The Venture
Sesi 11
J0692 - Entrepreneurship
Agenda
• Management of Succession
• Other Exit Barrier
J0692 - Entrepreneurship
Bankruptcy’s LessonsA. Overextension To MarketsB. Protects From Creditors Not
CompetitorsC. Entrepreneur = BusinessD. Recognize Failure Too LateE. Emotionally Painful
J0692 - Entrepreneurship
Reorganization
• Least Severe Alternative- “Breathing Room”
• Cash Flow Problems Can Be Overcome
• Plan Prepared & Approved By Court–Extension- Postpone Claims
–Substitution- Exchange Something For Debt
–Composition- Prorated Settlement
J0692 - Entrepreneurship
Bankruptcy SurvivalBargaining Chip- Restructure And ReorganizeFile Before Failure Of Cash Or RevenueChapter 11- Only If Chance Of RecoveryExamination Of Transactions For FraudMaintain Good RecordsUnderstand CompletelyTransfer Litigation To Bankruptcy CourtRealistic Reorganization Plan
J0692 - Entrepreneurship
Extended Payment
• Budgets Future Income To Outstanding Debt
• Payment Of All Priority Claims
J0692 - Entrepreneurship
Priorities
• Secured Creditors
• Administrative Expense
• Claims From Operations
• Wage Claims
• Contributions To Benefit Plans
• Claims Of Consumer Creditors
• Taxes• General Creditors
J0692 - Entrepreneurship
Liquidation
• Voluntary vs. Involuntary
• Involuntary Requirements–Debts Not Being Paid When
Due (1 – 3 Creditors)
–Custodian Appointed
–Fair Value Of Assets < Debts (Balance Sheet Test)
J0692 - Entrepreneurship
Bankruptcy Trustee
• Elected By Creditors- Interim Appointed
By Court
• Becomes Owner Of All Nonexempt
Property
• Can Set Aside Petitions
• Transfers Property To Creditor
J0692 - Entrepreneurship
Strategy DuringReorganization
• Prepare Plan
• Sell Plan
• Communicate
• No Checks That Can’t Be Covered
J0692 - Entrepreneurship
Reducing Risk Of Failure
Avoid Excess OptimismPrepare Good Marketing PlanMake Good Cash ProjectionsKeep Abreast Of MarketIdentify Business Stress Points
J0692 - Entrepreneurship
Bankruptcy Warning Signs
Financial Management Lax Inability To
Document/Explain Transactions
Large Discounts To Speed Up Cash Flow
Contracts Below Standard Amounts
Bank Wants Subordination Key Personnel Leave Lack Of Materials Unpaid Taxes Demand For Cash Payment Customer Complaints
Increase
J0692 - Entrepreneurship
Failure Reality
• Consult with Family/Friends
• Seek Outside Assistance
• Drop Venture That Is
Draining Resources
J0692 - Entrepreneurship
Succession Planning Issues
• Senior Management Committed To Plan
• Well-Defined Job Descriptions
• Open Process
J0692 - Entrepreneurship
Harvesting• Direct Sale
• Employee Stock Option–2-3 Year Plan to Sell To Employees
–Create Trust Fund
• Management Buy-Out- Based On Value Of Goodwill & Asset Appraisal