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Chapter Thirteen: Exit/Harvest/Turnaround
Review Questions (p.253)
1. Why would an entrepreneur seek to exit a business? The business may no longer
2. How can an entrepreneur be a millionaire on paper yet have no money in the
c. asset value – the total of all of the hard assets of the organization adding in a
d. capitalization of earnings – any unusual item that the lender or investor feels
e. market estimation – multiply the earnings of the business by the market
5. What steps should a business owner go through to prepare the business to be
6. What four options does a business owner have to sell the business? Options
IM 13-1
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Thirteen: Exit/Harvest/Turnaround
8. What are six things a business owner should keep in mind as he enters
negotiations to sell a business?
a. use a profession mediator
9. What is a turnaround? A turnaround is the effort to reverse the decline of the
business.
10. What are the different types of bankruptcy and when are they each
appropriate?
Chapter 11 - firm receives immediate protection while it reorganizes
Class Activities and Sample Assignments
1. Ask students to discuss the steps in selling a business. Why are they important to a
new small business starting out? (LO 13-2)
IM 13-2
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Thirteen: Exit/Harvest/Turnaround
2. Ask students to find an article related to a recent business that filed for bankruptcy.
Next, ask the students to discuss the valuation method associated with that
business. Choose one person from each group to be the spokesperson to share the
articles. (LO 13-2)
3. Ask students to discuss perquisites, or perks, that a new small business owner can
receive from the firm. Then ask them to discuss how they have the potential to
reduce the tax liability of the business. Reinforce the need for a new small business
owner to seek the advice of an attorney or other professional when considering tax
liability. (LO 13-2)
4. Ask students to discuss the methods associated with the value of the new small
business. Why is this important to a new small business owner? Provide examples
and write them on a board or flip chart. Discuss each method as a class. (LO 13-2)
5. Ask students to explain why a new small business owner needs to develop an exit or
harvest plan for the new small business during the planning stage for the business.
(LO 13-1)
6. Ask students to discuss what the price/earning ratio is used to accomplish. How is it
calculated?: (LO 13-.2)
7. Have students discuss why a new small business owner should be concerned about
the procedures and process associated with selling a business. (LO 13-2)
IM 13-3
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Thirteen: Exit/Harvest/Turnaround
Discussion Questions for Online/Hybrid classes
1. Which of the valuation methods do you think is the most important and why? (LO
13-2)
2. What are the four options from which a business owner can choose to exit the
business? Which one provides the simplest exit strategy? (LO 13-2)
3. What are the forms of bankruptcy available to a business owner? List at least three
forms of bankruptcy and discuss the form of bankruptcy that is beneficial to a sole
proprietor? Why? (LO 13-4)
4. Why is it important to consider an exit strategy when the new business is being
formed? (LO 13-1)
5. When would a business owner want to do a turnaround of the business? (LO 13-3)
6. How can a Board of Advisors assist a business owner with the challenges facing the
small business? (LO 13-3)
7. Why would a business owner want to close the business instead of reorganizing the
business? (LO 13-4)
8. What are the six important points for a business owner to consider regarding the
negotiations for selling the business? (LO 13-2)
9. How can a business owner assure the accuracy of the financial statements and
provide a level of legitimacy? (LO 13-2)
10.What is an initial public offering? (LO 13-2)
Discussion Questions for Online/Hybrid classes
1. Which of the valuation methods do you think is the most important and
why? (LO 13-2) Responses will vary. The valuation method chosen depends on
IM 13-4
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Thirteen: Exit/Harvest/Turnaround
2. What are the four options that a business owner can choose from to exit
the business? Which one provides the simplest exit strategy? (LO 13-2)
3. What are the forms of bankruptcy available to a business owner? List at
least three forms of bankruptcy and discuss the bankruptcy that is
beneficial to a sole proprietor? Why? (LO 13-4)
Chapter 11- the firm receives immediate protection while it reorganizes
4. Why is it important to consider an exit strategy at the formation of the new
5. When would a business owner want to turnaround the business? (LO 13-3)
6. How can a Board of Advisors assist business owners with the challenges
they face in a small business? (LO 13-3) A Board of Advisors can offer new
7. Why would a business owner want to close the business instead of
reorganizing the business? (LO 13-4) Facts may show that the business
IM 13-5
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Thirteen: Exit/Harvest/Turnaround
8. What are the six important points for a business owner to consider
regarding the sales negotiations? (LO 13-2)
a. use a profession mediator
9. How can a business owner assure the accuracy and provide a level of
legitimacy in their financial statements? (LO 13-2) The owner can have a
10.What is an initial public offering? (LO 13-2) An initial public offering (IPO) is
the offering of stock to the public.
Lecture Links
Lecture Link 13.1: Valuing the Business
(LO 13-2)
The authors in the text revealed that there are several standard valuation models and
rules of thumb for the established, publicly traded businesses. Use “Google” and search
“Business valuation”. Review the resources that provide pertinent information about
business valuation.
How could this information be useful to your business?
The authors in the text provide beneficial information that reveals the methods to
calculate the value of a firm. One interesting concept to consider is how a bank will
review a loan request if an individual or group who requires a loan wants to purchase a
business
IM 13-6
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Thirteen: Exit/Harvest/Turnaround
Search the internet for information on “How banks evaluate loan requests”. Review the
data provided about how a bank will evaluate a loan request. What did you discover?
Lecture Link 13.3: Angels on the Directory for Entrepreneurs
A business owner considering a turnaround strategy for a business that requires
financial assistance could consider an angel investor to assist with the financial
strategies of the business. The Angel Capital Education Foundation (ACEF) is a
charitable organization that provides education in the discipline of angel investments.
However, this is not an organization that offers financing or loans. They provide a
directory of potential angel investors that a business owner can obtain as a potential
resource for the business. Visit the website at http://www.angelresourceinstitute.org.
Are there any resources listed on this site that could help your business?
Bonus Internet Exercises
Bonus Internet Exercise 13.1: Give Me 5
Entrepreneurs gain a competitive advantage when they initiate business contracts and
maintain business operations at the business. Planning ahead provides the
entrepreneur the opportunity to keep the business alive and operating at optimal levels
of efficiency.
One resource for women and minority entrepreneurs is Give Me 5. “Give Me 5 derives
its name from The Equity in Contracting for Women Act (2000), which stipulates that
federal contracting officers award 5% of all contracts to women-owned businesses (Give
Me 5, 2015)i.” This is a national program that is designed to educate women business
owners on how to apply for and secure federal procurement opportunities.” Visit the
website at http://www.giveme5.com/ and evaluate how this resource benefits the
entrepreneur.
1. How do these resources benefit women and minority entrepreneurs? Be specific.
IM 13-7
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Thirteen: Exit/Harvest/Turnaround
2. Summarize the resources that are available to assist an entrepreneur. Do you
3. Review “The Latest News” and choose an interesting topic that you believe
enhances entrepreneurship. Briefly describe the topic or event and summarize
how it assists the entrepreneur.
Bonus Internet Exercise 13.2: Initial Public Offering (IPO)
(LO 13-2)
In this chapter we learned that an initial public offering (IPO) is the initial listing of a firm
as a public entity in the public equities market. Conduct research on the internet using
your favorite search engine and discover a company that implemented an IPO.
1. What company did you discover that implemented an IPO?
2. Who are the key officers of the organization?
3. What were the terms associated with the offering?
4. Do you believe that this was a good exit strategy? Why or why not?
Bonus Internet Exercise 13.-3: Business Valuation Tools
(LO 13-2)
A smart business person plans for a variety of circumstances when the business is
being started. Develop a plan to harvest the business and understand the process and
procedure used to value the business. Visit the website at www.exitadvisor.com
1. What did you discover at this website that can assist a business owner with the
valuation of a business?
2. What other information did you discover that can assist a business owner with
the sale of the business?
IM 13-8
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter Thirteen: Exit/Harvest/Turnaround
3. Why does a business owner establish an accurate value of a firm?
4. Why does a business owner consider an exit strategy of the firm?
IM 13-9
Copyright © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
i Give Me 5. (2009). http://www.giveme5.com/. Retrieved on February 20, 2015
