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J0692 - Entrepreneurship Ending The Venture Sesi 11.

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Presentation on theme: "J0692 - Entrepreneurship Ending The Venture Sesi 11."— Presentation transcript:

1 J Entrepreneurship Ending The Venture Sesi 11

2 J Entrepreneurship Agenda Management of Succession Other Exit Barrier

3 J Entrepreneurship Bankruptcy’s Lessons A.Overextension To Markets B.Protects From Creditors Not Competitors C.Entrepreneur = Business D.Recognize Failure Too Late E.Emotionally Painful

4 J 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

5 J Entrepreneurship Bankruptcy Survival  Bargaining Chip- Restructure And Reorganize  File Before Failure Of Cash Or Revenue  Chapter 11- Only If Chance Of Recovery  Examination Of Transactions For Fraud  Maintain Good Records  Understand Completely  Transfer Litigation To Bankruptcy Court  Realistic Reorganization Plan

6 J Entrepreneurship Extended Payment Budgets Future Income To Outstanding Debt Payment Of All Priority Claims

7 J Entrepreneurship Priorities Secured Creditors Administrative Expense Claims From Operations Wage Claims Contributions To Benefit Plans Claims Of Consumer Creditors Taxes General Creditors

8 J 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)

9 J Entrepreneurship Bankruptcy Trustee Elected By Creditors- Interim Appointed By Court Becomes Owner Of All Nonexempt Property Can Set Aside Petitions Transfers Property To Creditor

10 J Entrepreneurship Strategy During Reorganization Prepare Plan Sell Plan Communicate No Checks That Can’t Be Covered

11 J Entrepreneurship Reducing Risk Of Failure Avoid Excess Optimism Prepare Good Marketing Plan Make Good Cash Projections Keep Abreast Of Market Identify Business Stress Points

12 J 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

13 J Entrepreneurship Failure Reality Consult with Family/Friends Seek Outside Assistance Drop Venture That Is Draining Resources

14 J Entrepreneurship Succession Planning Issues Senior Management Committed To Plan Well-Defined Job Descriptions Open Process

15 J 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

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