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HARVESTING THE VENTURE:

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Tara Johnson

on 14 October 2013

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Transcript of HARVESTING THE VENTURE:

HARVESTING THE VENTURE:
A FOCUS ON THE FUTURE

WHAT EXACTLY IS THE HARVEST STRATEGY?
A harvest strategy is the way an entrepreneur or investor intends to extract his money from a business after it has become successful.


The Management Succession Strategy
Succession Strategy- Is a process for identifying internal people with the potential to fill key leadership positions in the business.

Management Succession- is successfully transitioning managerial capability within a firm.
Succession planning

A systematic approach to:
Building a leadership pipeline/talent pool to ensure leadership continuity.
Developing potential successors in ways that best fit their strengths.
Identifying the best candidates for categories of positions.
Concentrating resources on the talent development process yielding a greater return on investment.

Succession planning
Succession planning recognizes that some jobs are the lifeblood of the organization and too critical to be left vacant or filled by any but the best qualified persons.

There are 5 key aspects that must be considered for an effective succession plan.
Succession planning
The earlier the better.
KEY FACTORS IN SUCCESSION PLANNING
There are pressures and interest inside and outside the firm.
HARVEST STRATEGY: Challenges
Decisions regarding;

Managerial control and succession
Desire to initiate a liquidity event
Initial public offering (IPO)

WHAT EXACTLY IS THE HARVEST STRATEGY?
For example, a telecommunications company may implement a strategy to take profits from its land line business, to supplement research and development for its wireless communications business, if growth and profits are more likely. Advances in technology and changes in consumer behavior dictate which brands become cash cows.
HARVEST STRATEGY:
Types
company sale
IPO
WHAT IS THE PURPOSE?
This allows for equity to be repaid. Before making their investment, people will need to know the method of repayment and how long they will have to wait. Waiting usually takes 3-5 years. The actual length depends on complexity and the nature of the industry.
HARVEST STRATEGY: SIGNIFICANCE
Equity investors and lenders are assured that the owners intend to develop the business and actually sell it, either to public investor’s to another company.
Management challenges would be to make it a attractive investment candidate.
HARVEST STRATEGY:
NO EXIT
If the business plan does not contain a harvest strategy, that could be an indication that the founders intend to run it indefinitely as a ‘lifestyle business.’

In this type of situation, the original owners might provide favourable benefits for themselves, such as high salaries and bonuses and not provide equal benefits for outside investors.
KEY FACTORS: Forcing Events
These are happenings that cause the replacement of the owner/manager.

Death- of a family member
Illness or some other form of physical incapacitation- heart attacks, stroke ect.
Abrupt departure.
Legal problems
Severe business decline
Finical difficulties
KEY FACTORS: Source of succession
Entrepreneurial successor is someone who is; high in ingenuity, creativity, and drive. Managerial successor has to be interested in sufficiency, internal control and effective use of resources.
Sources inlcude family member or outside specialist.
Legal Restriction
The first source of succession is family and in house prospects. How ever in private business such practices can be challenged.
Type of venture
Some entrepreneurs are easy to replace, some cannot be replaced. e.g. when we speak about Apple we basically speak about Steve Jobs.
Capabilities of Managers
The skills, desires and abilities of a replacement will dictate the future and direction of an company.

Eg at Microsoft Bill Gates is being asked to step down and allow Steve Ballmer to take over.
Entrepreneur’s Vision
Every good entrepreneur has expectations, hopes and desires for their organization. The successor should share that vision.
Environmental Factors
Sometimes a company needs a successor due to the change in the business environment.
For eg Apple started the era of touch screen products (tablets, cell phones etc) which caused a shift in the market for these products.
The Management Succession Strategy
Management succession ensures future leadership capability, which is essential for an established business to continue thriving. Apple ex-CEO Steve Jobbs planned his management succession for years and even left behind a large library with instructional and multi-media materials to continue his legacy. It is important for all private business to create a succession plan to ensure the business is transitioned to a suitable family member.
Pressures and interest inside the firm
Family members: wanting to get or increase control over operations.

Nonfamily members (employees): sometimes pressure the owner to protect their own interest, especially if they are valuable to the company
Pressures and interest outside the firm
Family members: Pressure of family members on the owner to hire them. Other sources of disruption can include, marriage, birth death and divorce of a family member can require a response from both family member and business. Inheritance.

Nonfamily element: changing of strategy of the firm to adjust to new market. Customers, technology or new product development.
Time
Group 29-30
Tara Johnson
Georgette Foster
Javaughn Lyons
Kevon Harris
Cleon Barrett
Matthew Williams
Akil Aikman
James Thompson
"The five essential entrepreneurial skills for success are concentration, discrimination, organization, innovation and communication."

Michael Faraday
The Case of the Runaway Success
Full transcript