Question

Chapter 16 explores how business owners and entrepreneurs exit their business.Sometimes that exit is successful and sometimes not so successful.Based on the exit options discussed in Chapter 16 please select the option that best fits the following examples and explain why that method of exit makes the most sense.

1. A small technology company that has raised $3 million in venture and Angel capital but lacks the resources and management experience to grow any larger.
2. A small manufacturing firm owned by a sole owner that has not created a succession plan or designated a family member to take over the business.
3. A small real estate investment firm that has made a number of bad investments and must end operations.
4. An owner of small chain of restaurants that have been successful and for which he provided shares to his employees and local shareholders.
5. A tech company with explosive growth that has raised millions in venture capital and requires more sources of capital as a currency to make acquisitions to continue to fuel rapid growth

Answer 1

A small technology company that has raised $3 million in venture and Angel capital but lacks the resources and management experience to grow any larger. Solution: - The firm should look for M&A option with a firm which has the management experience and expertise to run the technology firm. Otherwise in-spite of funds being invested by venture capital and angel investors it will not be channelized in a proper way.

A small manufacturing firm owned by a sole owner that has not created a succession plan or designated a family member to take over the business. Solution:- He can either nominate a family person to take his business further or can hire a manager to take care of his operations till he decides what steps to take for his business to either sell the business if none of his family is interested or to close down eventually.

A small real estate investment firm that has made a number of bad investments and must end operations. Solution:- The business must close down as bad investments has affected the firm continuing in risky business like real estate will be difficult.

An owner of small chain of restaurants that have been successful and for which he provided shares to his employees and local shareholders. Solution:- As the firm is successful and it has already formed a private limited company and has shares to its local shareholders and employees, hiring a professional would help the firm grow and take it to next level. As a firm is successful investors will like to invest in the firm and the firm will grow.

A tech company with explosive growth that has raised millions in venture capital and requires more sources of capital as a currency to make acquisitions to continue to fuel rapid growth. Solution:- They should look for venture capital and angel investors as they have the opportunity to grow and can cash on this. If the valuations are right they can raise funds and this will help them acquire business to grow. At the end they can, look to get listed on the stock market.