Unit 42-LO4 Assess the various ways a small business owner can exit the business and the implications of each option-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

A small business owner may have many options when it comes to exiting their business. They can sell the company, they can sell off some of the company’s assets or they can offer a buyout to employees or partners. The decision on which course of action is best for them will depend on factors such as who owns what percentage of the company and how much money is available at that time. It also depends on whether there are any restrictions in place by investors, creditors, shareholders, or other stakeholders. In this article, we take a look at each option and explore their implications with regard to taxes, liabilities, and retirement planning.

Also Read: Analyse the key considerations SMEs should consider when evaluating growth opportunities

Exit: success and failure:

The main ways an owner-manager might exit the business

Some people start businesses with the idea of using them as a cash cow while continuing to put in their day jobs. Others are building themselves a nest egg so that they can retire early and live out their retirement years comfortably. Even if people are happy where they are, it often becomes necessary to close down operations so that an owner-manager can take care of another business opportunity or spend more time with loved ones. There are many different ways for an owner-manager to exit the business, but most fall into one (or more) of these categories: will, transfer ownership through purchase, buyout agreement, and changing careers.

The key reasons for business failure (external and internal) and how business failure might be prevented

There are many reasons why businesses fail. Failure might be prevented by analyzing the following *factors*:

  • Environmental factors comprising social-economic, Geographical, Supply-side
  • Internal Factors comprising management, Product or Service mix, and customer service
  • External Factors can include recessionary times or corporate competition.

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The key reasons for business failure (external and internal) and how businesses might utilize these qualitative research findings from one study to better innovate their future production in order to avoid failing in 2019? The researchers found that three segments of market failures caused disadvantages: Brand variation, Inaccurate product development due to competitor formation based on a dynamic demand model with a switching cost, and dynamic rival-based demand model with customer loyalty.

Mechanisms for exit in the event of failure

There are three mechanisms for exit in the event of a failure in a nuclear power plant.

The first mechanism is designed to contain the spillage of radioactive material and thus maintain the safety of personnel inside the reactor building.

The second and third mechanisms are used to remove heat from the core, stopping criticality (i.e., self-sustaining fission reactions). This includes systems known as Emergency Core Cooling Systems or ECCS and passive heat removal from decay which ceases when all uranium fuel within rod bundles has either fissioned or decayed (usually after about 85 days) without being removed. It can also be slowed using neutron absorbent substances such as Boron Carbide inserted into control rods or by inserting control rods into the side of the reactor from which they were previously withdrawn.

Exit routes for successful businesses: selling or floating the business, valuing the company

Some of the benefits of selling a business include diversifying holdings and protecting against unforeseen drops in company values. The downside is that you are getting rid of something that has been on your watch list for quite some time.

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Unlikely to make someone rich or famous, but exiting in this way will not have any diminishing impact on your other investments.

Selling also attracts potential buyers with deep pockets who are anxious to take over profitable companies and pay top dollar, so it’s usually an attractive option if there are plenty of undiversified buys on offer (carpet-bagger) and/or ˜floatation’ (stock market listing) is favorable for your business.

Valuing a business ˜for sale’ or taking it public, will cost you time as well as money. You’ll need to hire an investment banker or accountant and do some market research to see how much cash you can expect in the marketplace.

Growth and succession in the family business:

How the considerations of growth affect the family business

The considerations of growth affect the family business needs to think about taxation. If they don’t plan ahead and have a healthy tax cushion, they could end up paying taxes on their assets which would reduce their earnings and make them less likely to invest in things like research and development, new hires, etc. It’s a very fine balance not only in the best time to file for an extension but also deciding when it’s appropriate to withdraw some funds from other sources that may be sitting idle such as 401(k)s or retirement accounts like IRAs.

Monitoring your assets can help keep you better prepared and ensure you’re taking advantage of any opportunities that arise while simultaneously avoiding penalties associated with those opportunities.

Areas of potential conflict

Conflict is the act of disagreeing or fighting, whether it be rhetorical, physical, mental, emotional, or any other form. Conflict in teams and organizations manifests as interpersonal conflict such as an argument. There are many types of conflicts that people may face both at work and outside of work; some include those listed below.

  • Ethical vs Unethical
  • Typical vs Non-typical
  • Intellectual vs Emotional
  • Costly vs Inexpensive

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Take for example the ethical and unethical conflict: if something feels wrong because it goes against one’s morals then there is a conflict between the person’s conscience and dispositional desires to act on temptations to do what they know is wrong (or immoral).

Succession planning

Succession planning is the process of developing, implementing, and refining an organization’s plans for recruitment, selection, development, and deployment of successors at all levels within a company. Succession planning is likely to be most beneficial when it includes people who are diverse in experience, age, and ability. The best succession plans identify potential leaders at every level and consider how they can be developed to lead upward.

A good succession plan goes beyond finding someone qualified to replace a retiring or departed leader. It also ensures that there are enough competent people who have the skills necessary for each leadership position throughout the organization–and who can move up as successors reach those positions so they too will eventually become retirement risks.

Cultural issues

Culture is a system of shared beliefs and customs among people in a particular group, ethnicity, or time period. It is also the set of beliefs, values, and symbols that society or a social group uses to relate to one another. Culture is passed from one generation to the next in the form of traditions.

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