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ENDING THE VENTURE

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ROSELINE LUBULELLAH
STRATHMORE UNIVERSITY

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 Introduction
Even though the intent of all entrepreneurs is to
establish a business for a long time, many
problems can cause these plans to fail.

Since about one-half of all new ventures fail in

their first four years of business, it is important for
the entrepreneur to understand the options for
either ending or salvaging a venture.

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 Requirements for keeping a New
Venture afloat

2. Avoid excess optimism when business appears

to be successful
3. Always prepare good marketing plans with
clear objectives
4. Make good cash projections
5. Keep abreast of the market place
6. Identify stress points that can put the business
in jeopardy

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 Warning Signs Of Bankruptcy
1. Management of Finances becomes lax, so that
no one can explain how money is being spent
2. Directors cannot document or explain major
transactions
3. Customers are given large discounts to enhance
payments because of poor cash flow
4. Contracts are accepted below standard
amounts to generate cash
5. Bank requests all repayments of its loan(s)

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2. Key personnel leave the company
3. Materials to meet orders are lacking
4. Lateness in paying staff
5. Suppliers demand payment in cash
6. Customers’ complaints regarding service and
product quality increase

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Lessons from those who have experienced
Bankruptcy include:
Many entrepreneurs spend too much time and
effort trying to diversify in markets where they lack
knowledge.
Bankruptcy protects entrepreneurs only from
creditors and not from competitors
It is difficult to separate the entrepreneur from the
business
Many entrepreneurs do not think that there
businesses are going to fail until it is too late.
Bankruptcy is emotionally painful. Don’t go into
hiding. Let employees and everyone else know
what is happening.
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 Is This The End?
Bankruptcy and Liquidation do not have to be the
end for the entrepreneur. Many entrepreneurs
have failed many times before finally succeeding
If failure does occur the entrepreneur should:

4.Consult with his or her relatives

5.Seek outside assistance from professionals,
friends and business associates
6.Try not to hang on to a venture that will
continually drain resources
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Bankruptcy offers three options for the
entrepreneur:
2.The venture will be reorganized under a plan
approved by the courts.
This plan avoids large expenses and prepares
creditors in advance so that negotiations can occur
before the courts become involved
4.An extended time payment plan to cover
outstanding debts.
Both of these alternatives are designed to help
entrepreneurs salvage the business and keep it
going.
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2. The venture will be liquidated either voluntarily
or involuntarily.

One of the other venture-ending decisions that an

entrepreneur may face is succession of the
business.
If the business is family owned, the entrepreneur
would likely seek a family member to succeed.

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Other options, if no family member is available or
interested, include transferring some or all of the
business to an employee or outsider, or hiring an
outsider to manage the business.

Direct sale, employee stock option plan, and

management buyout are alternatives for the
entrepreneur in selling the venture.

These are all exit strategy options for the

entrepreneur.

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