Achieving
Success in the Small
Business
Chapter 20
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Learning Objectives
LO1 Recognize the stages of the small business life cycle.
LO2 Consider the impact of the product life cycle.
LO3 Understand the options for harvesting or closing the small business.
LO4 Know the firm-level critical success factors for small business.
LO5 Understand what success means with the quadruple bottom line.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Small Business Life Cycle
 Business life cycle
 The sequence or pattern of developmental stages any business goes through during its life span.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Figure 20.1
The Small Firm Life Cycle
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Life Cycle Stages
Resource
Maturity
Emergence
Existence
Success Survival
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Small Business Life Cycle
 Liability of newness
 The set of risks faced by firms early in their life cycles that comes from a lack of knowledge by the owners about the business they are in and by customers about the new business.
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Small Business Life Cycle
 Slack resources
 Profits that are available to be used to satisfy the preferences of the owner in how the business is run.
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Avoiding Customer Complacency
Recency Frequency
Potency Recommendation
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Figure 20.2
The Product Life Cycle
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Figure 20.3
Service Life Cycle
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Figure 20.3
The Hierarchy of
Business Outcomes
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Closing the Small Business
 Harvest
 Recover value through a sale of a firm or its assets.
 Initial public offering (IPO)
 Transfer method describing the first-time public sale of a stock listed on a public stock exchange.
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Closing the Small Business
 Consolidation
 A transfer method in which a small business is bought by a larger firm for the purpose of quickly growing the larger firm.
 Employee stock ownership plan
 A formalized legal method to transfer some or all of the ownership of a business to its employees.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Closing the Small Business
 Transfer
 An endgame strategy in which ownership is moved from one person or group to another.
 Termination
 An endgame strategy in which the owner closes down a business
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Closing the Small Business
 Liquidity enhancement
 An estate planning strategy which focuses on generating cash to cover likely estate taxes.
 Tax management
 An estate planning strategy which focuses on minimizing estate tax payments.
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Closing the Small Business
 Estate freeze
 An estate planning strategy which focuses on transferring assets to heirs when the asset costs are low.
 Walkaways
 Business terminations in which the entrepreneur ends the business with its obligations met.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Closing the Small Business
 Bankruptcy
 An extreme form of business termination which uses a legal method for closing a business and paying off creditors when debts are substantially greater than assets.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Closing the Small Business
 Workout
 A form of business termination in which the firm’s legal or financial obligations are not fully met at closing.
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Closing the Small Business
 Reorganization
 The popular name for a Chapter 13 bankruptcy in which a bankrupt firm continues to operate while paying off debts identified by the bankruptcy trustee
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Closing the Small Business
 Liquidation
 The popular name for a Chapter 7 bankruptcy in which a bankrupt firm’s assets are sold by the bankruptcy trustee and the proceeds used to pay the firm’s debts.
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Closing the Small Business
 Serial entrepreneurs
 People who open multiple businesses throughout their career.
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The Not-So-Secret Secrets of Success
Critical Success Factors fall into two broad types:
 Outside help
 Entrepreneurial experience.
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Critical Success Factors
 Being incorporated
 Employees
 Extreme start-up capital
 Protectable intellectual property
 Brand name affiliations or partners
 Optimal strategies
 Presales
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Table 20.1
The Four Bottom Lines
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