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Creating a successful company builds wealth for the owner because the value of the business grows along with revenues. Harvest strategies are used to turn this value into cash -- a return on investment for the owner.
Types A harvest strategy can be used to extract the value from a product, a product line or a business segment. The most extreme form of harvest strategy is selling the entire company and exiting -- termed an exit strategy.
Products have life cycles, and at some point demand for them weakens because of factors such as changing consumer tastes or new technologies being introduced that better meet customer needs. The business owner determines that the company assets deployed to produce and market the product can be better used elsewhere.
Successful companies are continually innovating and evolving -- developing new products or services and entering new markets. The business owner seeks to use his resources to pursue opportunities with the greatest revenue and profit potential.
Harvesting one segment of his business and redeploying the assets where the return on these investments will be higher enables the company to increase its value. Discretionary expenses such as advertising and promotion are reduced, and investments to expand production are curtailed because the owner anticipates that sales for the product will stop growing and eventually decline.
Through these cost reductions, the owner hopes to maintain profitability on the product resulting in an ongoing cash stream. He devotes just enough marketing resources to the product to keep the sales decline from accelerating.
Alternatives A harvest strategy takes time to unfold. If the new opportunity the owner wants to pursue is emerging rapidly, waiting to redeploy assets can result in the window of opportunity closing, perhaps because competitors got there first.
The owner may decide to sell the entire business segment -- or the whole company -- which can typically be done more quickly than executing the harvest strategy.
Sale of the company enables the owner to receive a large payoff and relieves him of the responsibilities of running the company and managing employees.
Another issue in deciding which strategy to pursue is management focus. Liquidating the investment in the current product frees up management time and creativity. If the product to be harvested involves a proprietary technology, the owner may decide to license the product to another company rather than continue to produce it himself.
He earns a steady royalty stream on the license and can redeploy the assets formerly used to make and market the product.A business plan lays out a written plan from a marketing, financial and operational viewpoint. Sometimes, a business plan is prepared for an established business that is moving in a new direction.
A business continuity plan (BCP) is a plan to help ensure that business processes can continue during a time of emergency or disaster. Such emergencies or disasters might include a fire or any other case where business is not able to occur under normal conditions.
What is a 'Limited Liability Company - LLC' A limited liability company is a corporate structure whereby the members of the company are not personally liable for the company's debts or liabilities. A key section of the business plan that needs to be updated annually and monthly and/or quarterly is the sales caninariojana.com sales forecast is an estimate of the sales of goods and services your business is likely to achieve over the forecast period along and the estimated profit.
LLS definition / LLS means? The Definition of LLS is given above so check it out related information. What is the meaning of LLS?
The meaning of the LLS is also explained earlier. Till now you might have got some idea about the acronym, abbreviation or meaning of LLS. What does LLS mean? is explained earlier.
You might also like some similar terms related to LLS to know more about it. Operating a business. You need to consider various indicators before you decide if your activity is a business of primary production.
To completely understand whether you are undertaking a business you should carefully read Taxation Ruling TR 97/11 Income tax: .