Deck 15: Harvesting the Entrepreneurial Venture

Question 1

A type of successor who is high in ingenuity,creativity,and drive would be considered a(n)

A)managerial successor.
B)entrepreneurial successor.
C)opportunistic successor.
D)all of the above.

Answer 1

B

Question 2

Research on family firms demonstrates which of the following facts?

A)only 16 percent make it to a third generation
B)many family firms cease to exist after one month
C)only nine out of ten make it to a second generation
D)only 3 percent make it to the next generation

Answer 2

A

Question 3

The forcing events that require an entrepreneur to step aside and let someone direct the operation are usually unforeseen and create major problems for the business.

Answer 3

True

Question 4

Succession pressure inside the firm exists

A)when the founder wants to give up authority.
B)when family members want to keep and manage the business.
C)nonfamily employees don't want the business.
D)competition-is hurting the business.

Question 5

The average life expectancy of a privately held firm is

A)24 years.
B)10 years.
C)and indefinite number of years.
D)50 years.

Question 6

The Oakland Scavenger case is profound to owners of family businesses in that

A)conceivably, the owner can be sued for not giving equal treatment to a son as to a daughter.
B)conceivably, the owner can be sued by an employee of a different ethnic origin based upon not being accorded the same treatment as a son or daughter.
C)conceivably, the owner can be sued for not declaring a family member his or her successor.
D)the owner can be fined for not declaring his or her first son the heir to the business.

Question 7

A type of successor who is interested in efficiency,internal control,and effective use of resources would be considered a(n)

A)managerial successor.
B)entrepreneurial successor.
C)opportunistic successor.
D)family successor.

Question 8

Once the decision is made to harvest the business,the way forward is easy.

Question 9

A harvest plan defines how and when the owners and investors will realize an actual cash return on their investment.

Question 10

Which of the following is not an example of pressures or interests from within a firm that affect succession issues?

A)rivalry among various branches of the family
B)pressure from a family member to start his/her own business
C)employee wanting a percentage of the business in the owner's will
D)pressure on the owner/manager to designate an heir

Question 11

The liquidity event stands for positioning the venture for the realization of a cash return for the owners and investors.

Question 12

"Harvest" does not mean

A)family members agree about the business.
B)that any profits will be reaped.
C)that the firm continues to exist.
D)the challenges and responsibilities of the entrepreneur are over.

Question 13

An entrepreneurial successor is someone who is interested in efficiency and the effective use of resources.

Question 14

One advantage of an early-entry strategy for the younger generation succeeding the older generation of a family business is

A)normal mistakes are viewed as incompetence.
B)perspective of the environment is broadened.
C)successor's skills are judged with more objectivity.
D)skills specifically required by the business are developed.

Question 15

There are two types of succession pressures: family and nonfamily.

Question 16

Nonfamily members sometimes bring pressure on the owner-manager in an effort to protect their personal interests.

Question 17

The harvest decision may come when the venture has grown to a stage where an IPO is a possibility.

Question 18

The steps in developing a succession strategy are understanding the contextual aspects,identifying successor qualities,and carrying out the succession plan.

Question 19

A harvest plan

A)is similar to a will.
B)defines when and how business owners will realize a cash return on investment.
C)leaves the business to the next generation.
D)is simple to implement.

Question 20

An exit strategy is defined as that component of the business plan where an entrepreneur describes a method by which investors can realize a tangible return on their investment.

Question 21

The president of a successful lumberyard has decided to retire in a year. There are two relatives working in the lumberyard who want to take over,but have little business knowledge. The president wants to keep the company in family hands. What should be done so the company stays in the family?

Question 22

Which of the following is not a contextual aspect to be considered in an effective succession plan?

A)technology
B)time
C)environmental factors
D)type of venture

Question 23

Which is an influencing factor in succession?

A)family and business cultural issues
B)government regulation
C)current economic conditions
D)the competition

Question 24

A typical example of a forcing event is

A)death.
B)a natural disaster.
C)an IRS audit.
D)a slow business year.

Question 25

Which of the following steps should be carried out third when deciding to sell a business?

A)Publicize the offer to sell.
B)Value the business.
C)Finalize the prospective buyers.
D)Time the sale appropriately.

Question 26

What are the four critical steps to consider in developing a succession strategy in a family business?

Question 27

One advantage of the delayed-entry strategy for the younger generation succeeding the older generation of a family business is that

A)a successor's skills are judged with greater objectivity.
B)strong relationships are readily established.
C)normal mistakes are viewed as incompetence.
D)knowledge of the environment is limited.

Question 28

The employees at Donnely and Associates have noticed a case of favoritism toward the president's son Jim. Jim constantly breaks company policy. The president is planning to retire in a few years. What should be done about the growing unrest in the company?

Question 29

Bill and James Raymond have worked for their father's company for 15 years. Their father,who is president and now wants to retire,wants his sons jointly to take over the company. Bill and James have never agreed on anything. Should their father try another succession plan?

Question 30

Describe the legal concerns over family business succession citing the Oakland Scavenger case.