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Tactical Plan: Decline Phase
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Tactical Plan: Decline Phase
Assessing the viability of selling GSD fully mature business. Is the company a strong
candidate for sale? Why or why not?
A business’ viability is largely dependent on its potential to survive for a lengthy period
and its ability to sustain profits for the same period without significant external injections.
Therefore, a business' resale value is looked at from a profit perspective or the ability to meet
operational costs without plunging into borrowing (Bhide, 2019). Several factors come into play
when determining the viability of selling a fully mature firm. These include the prevailing
condition of the market, industry trends and their potential effect on the company's profitability,
and the business's financial success. A firm that has a proven track record for profit making and
growth, a strong brand reputation, and a dedicated client base is usually a good candidate for
sale. A business with diminishing sales and as well as declining market share, below-
expe financials, or substantial operational issues, on the other hand, may struggle to attract
possible purchasers. Finally, selling a business should be based on a thorough assessment of the
company's strengths, flaws, opportunities, and dangers, as well as the owner's personal
aspirations and values.
From a biblical perspective, the decision to sell a business should also consider ethical
considerations such as fair treatment of employees, customers, and suppliers, as well as honoring
God's principles of stewardship and integrity in all business dealings (Proverbs 16:3).
Determining the value of the business and what methods are available for marketing the
company.
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The are many methods that can be applied to determine the exact value of a business or the value
of an individual's contribution. These methods include the asset-based approach, the income-
based approach, and the market-based approach. These methods help with determining the worth
of a corporation. The asset-based approach calculates a company's worth by adding the entire
value of its assets and subtracting its liabilities. The market-based method estimates a company's
worth by comparing it to similar companies that have recently sold. Finally, the income-based
method assesses the worth of a firm by examining its cash flow and profit potential. Below are
how the three methods can be used to determine the true value of a business.
Asset-based approach: Often viewed as the most direct method. It encompasses calculating the
value of the company by adding up the fair market value of its assets and subtracting its
liabilities. For example, if GSD’s fair market value of the business's assets is $1,000,000 and its
liabilities are $450,000. The calculation would be:
Value of business = Fair market value of assets - liabilities
Value of business = $1,000,000 - $450,000
Value of business = $550,000.
Similarly, the market-based approach method, to be specific, determines the value of a
business by comparing it with other similar businesses in the market that have recently been sold.
For instance, if there is a similar business that has been sold for a multiple of 2 times their
earnings before interest, taxes, depreciation, and amortization (EBITDA), then GSD would
equally have the same treatment giving us the below determination. Let’s say business BTQ has
an EBITDA of $540,000. The calculation would be as shown:
Value of business = Multiple x EBITDA
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Value of business = 2 x $520,000
Value of business = $1,040,000
There are several ways to promote a firm for sale, including advertising in industry
journals, reaching out to rivals, engaging a broker or intermediary, or using internet markets for
buying and selling enterprises. To target potential customers and offer a clear description of the
company's financials, operations, and future development prospects, a complete marketing plan
should be prepared. It is critical to collaborate with specialists such as accountants and attorneys
to ensure that all legal and financial criteria are followed during the marketing and sale process.
Changing the nature of business: New markets, products, or business forms.
Depending on the aims and possibilities available, there are various methods to possibly
change the character of a firm. One approach may be to enter new markets, either geographically
or by targeting a new demographic. This might entail performing market research to find
prospective new clients and then modifying marketing strategy and product offers as needed.
Another strategy may be to create new goods or services that complement or expand on existing
offers, which could need investment in R&D or strategic alliances.
On the other hand, the business structure might be altered, for example, by converting it
to a partnership from a sole proprietorship or corporation (Mintzberg, Ahlstrand, & Lampel,
2015). This might result in advantages such as shared liability, better access to financing, and
potential tax benefits. However, altering the business form may need substantial legal and
financial concerns, such as regulatory compliance and potential ownership and management
restructuring. Finally, the choice to change the nature of a business should be informed by a
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thorough examination of the possible rewards and dangers, as well as the company's ability to
adapt and implement new strategies.
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References
Bhide, A. (2019). These are the questions every entrepreneur must answer. Harvard Business
Review, 74(6), 120-130.
Mintzberg, H., Ahlstrand, B., & Lampel, J. (2015). Strategy bites back: It is time for a
fundamental rethink. Pearson Education.
Proverbs 16:3 - "Commit to the Lord whatever you do, and he will establish your plans."
