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Diversification and Divestment
By recognizing and addressing their business’s needs and pitfalls, entrepreneurs should be able to save their business from a potential collapse.
By recognizing and addressing their business’s needs and pitfalls, entrepreneurs should be able to save their business from a potential collapse.
All businesses experience good times and bad times, and at any given moment, entrepreneurs must be aware of how their business is functioning. No business fails out of the blue; there are always warning signs that hint at a business’s underlying troubles. To be as successful as possible, business leaders must learn how to assess their business—and, if needed, diversify. Though diversifying often comes with its own set of risks, the potential rewards may outweigh these. Hence, entrepreneurs should consult with their team to determine which course of action is best for the business’s future. If a business’s faults aren’t remedied in time—or if they can’t be fixed—a business owner may have to divest themselves from the business—or possibly even liquidate the business altogether. It is thus important for entrepreneurs to understand the pros and cons of these processes.
Success is, of course, never guaranteed, but by arming themselves with the proper tools, business owners can increase their chances of achieving success. Indeed, to save their business from financial ruin, entrepreneurs must learn how to evaluate their business, recognize and address its shortcomings, enter new markets, and keep abreast of current market trends. Being an entrepreneur is by no means easy, but if you put in the necessary work, your business will run more smoothly.
Introduction
All leaders must be aware of the successes and challenges an organization experiences. They must establish systems of reporting which allow them to analyze their entire organization. There must be a combination of internal and external analyses of the organization to determine its performance. When organizations collapse, it is not something that occurs without warning; it often results from poor leadership, where no system is in place to detect the challenges, or the leaders were too slow to respond to those challenges in strategic ways.
Whether organizations are large or small, they must be evaluated. The evaluation of an organization must become a routine thing. Both financial and non-financial reports are necessary for the evaluation. Those reports must be discussed at regular management meetings where the approach is decided upon and leadership decisions are made concerning the future of the organization.
When organizations experience challenges in the same market with the same product, then this may be a signal for them to diversify. With diversification, there will be new risks that the organization will have to embrace. Those new risks become possible because the organization will be entering new markets with new products, and there will be some uncertainty as to how customers will respond.
If the lifecycle of some products has reached the decline stage, then leaders will not be able to make much profit or cash inflow from them. Sometimes, products that reach the decline stage will have great success in new markets. Entering new markets requires leaders to choose which entry mode they prefer. They also have to choose the most suitable strategy for them to enter the new markets. There are some signs that leaders must look for to determine when diversification is necessary.
After leaders have tried their best but are unable to save the strategic business unit from continuous failure, then it may be time to divest that business unit. Divestment can be painful for leaders, as they have to dispose of part of the organization. However, it is necessary to do this to save the rest of the organization.
If divestment does not work, then it might be time to liquidate the organization. With liquidation, the entire organization will be disposed of. There can be many processes and much time involved in liquidating the organization, and there will be many legal and regulatory requirements to meet before liquidation is completed.
Divestment and liquidation can result in capital gain or loss. Taxes will have to be paid on capital gain. Once the organization disposes of an asset, then it needs to adjust its financial records to reflect the disposal. When divestment and liquidation take place, employees will be impacted. Leaders must be prepared to promptly provide employees with retrenchment benefits.
Blurb
All businesses experience good times and bad times, and at any given moment, entrepreneurs must be aware of how their business is functioning. No business fails out of the blue; there are always warning signs that hint at a business’s underlying troubles. To be as successful as possible, business leaders must learn how to assess their business—and, if needed, diversify. How often should entrepreneurs evaluate their business? How can diversification help a struggling business? When should a business owner start to think about promoting their business in new markets? What are the differences between divestment and liquidation? In this book, Geary Reid offers answers to all of these questions—and many more. By recognizing and addressing their business’s needs and pitfalls, entrepreneurs should be able to save their business from a potential collapse.
Author Bio
Throughout his life, Geary Reid has seen businesses experience a myriad of challenges. Hopefully, though, with the proper tools, entrepreneurs can get their businesses back on track before it is too late. Recognizing how difficult it is to be a business owner, Read has decided to reach out to entrepreneurs, teaching them how to evaluate their business, develop a business plan, diversify, and enter new markets. All entrepreneurs will face difficulties, but by understanding their business’s current needs and following market trends, they will increase their chances of achieving financial success. With this book, Reid wants to show entrepreneurs—both present and aspiring—how to make their businesses as efficient and profitable as possible.
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