1. Ending The Venture
Sesi 11
J Entrepreneurship

2. Agenda Management of Succession Other Exit Barrier
J Entrepreneurship

3. Bankruptcy’s Lessons Overextension To Markets
Protects From Creditors Not Competitors
Entrepreneur = Business
Recognize Failure Too Late
Emotionally Painful
J Entrepreneurship

4. Reorganization Least Severe Alternative- “Breathing Room”
Cash Flow Problems Can Be Overcome
Plan Prepared & Approved By Court
Extension- Postpone Claims
Substitution- Exchange Something For Debt
Composition- Prorated Settlement
J Entrepreneurship

5. Bankruptcy Survival Bargaining Chip- Restructure And Reorganize
File Before Failure Of Cash Or Revenue
Chapter 11- Only If Chance Of Recovery
Examination Of Transactions For Fraud
Maintain Good Records
Understand Completely
Transfer Litigation To Bankruptcy Court
Realistic Reorganization Plan
J Entrepreneurship

6. Extended Payment Budgets Future Income To Outstanding Debt
Payment Of All Priority Claims
J Entrepreneurship

7. Priorities Secured Creditors Administrative Expense
Claims From Operations
Wage Claims
Contributions To Benefit Plans
Claims Of Consumer Creditors
Taxes
General Creditors
J Entrepreneurship

8. Liquidation Voluntary vs. Involuntary Involuntary Requirements
Debts Not Being Paid When Due (1 – 3 Creditors)
Custodian Appointed
Fair Value Of Assets < Debts (Balance Sheet Test)
J Entrepreneurship

9. Bankruptcy Trustee Elected By Creditors- Interim Appointed By Court
Becomes Owner Of All Nonexempt Property
Can Set Aside Petitions
Transfers Property To Creditor
J Entrepreneurship

10. Strategy During Reorganization
Prepare Plan
Sell Plan
Communicate
No Checks That Can’t Be Covered
J Entrepreneurship

11. Reducing Risk Of Failure
Avoid Excess Optimism
Prepare Good Marketing Plan
Make Good Cash Projections
Keep Abreast Of Market
Identify Business Stress Points
J Entrepreneurship

12. Bankruptcy Warning Signs
Financial Management Lax
Inability To Document/Explain Transactions
Large Discounts To Speed Up Cash Flow
Contracts Below Standard Amounts
Bank Wants Subordination
Key Personnel Leave
Lack Of Materials
Unpaid Taxes
Demand For Cash Payment
Customer Complaints Increase
J Entrepreneurship

13. Failure Reality Consult with Family/Friends Seek Outside Assistance
Drop Venture That Is Draining Resources
J Entrepreneurship

14. Succession Planning Issues
Senior Management Committed To Plan
Well-Defined Job Descriptions
Open Process
J Entrepreneurship

15. Harvesting Direct Sale Employee Stock Option
2-3 Year Plan to Sell To Employees
Create Trust Fund
Management Buy-Out- Based On Value Of Goodwill & Asset Appraisal
J Entrepreneurship