harvest strategy business plan example

Harvest Strategy

A decision to minimize spending on a specific product to maximize profitability, despite a potential decline in market share

What is a Harvest Strategy?

A harvest strategy is a calculated decision to minimize all types of spending on a specific product to maximize profitability, despite a potential decline in market share . A harvesting strategy can be developed for product or business lines and serves as an “exit” plan should a product become outdated.

Harvesting strategies are usually used and put into action at the end of a product or business life cycle . At this point, it is decided that additional investment into the product or business line will not increase revenue.

• A harvest strategy is a calculated decision to minimize all types of spending on a specific product to maximize profitability, despite a potential decline in market share.
• The strategy can be developed for product or business lines and serves as an “exit” plan. It is usually used and put into action at the end of a product or business life cycle.
• There are four common stages that every business or product line is expected to follow – the start-up or introduction stage, the growth stage, the maturity stage, and the renewal or declination stage.

The Product or Business Life Cycle

To fully comprehend the use and applicability of a harvest strategy, it is beneficial to understand the business/product life cycle. There are four common stages that every business or product line is expected to follow. They include the start-up or introduction stage, the growth stage, the maturity stage, and the renewal or decline stage.

• The start-up stage is the very beginning of the cycle. The business model is still being developed, and significant amounts of investment is needed to market the release of the new product or business line. The start-up stage focuses on increasing customer awareness and generating initial sales.
• The growth stage of a product or business line is the stage at which demand starts to increase, thereby offsetting an increase in overall production and product access and availability. At the growth stage, the existing consumer base begins to mature, while traction for new customers continues to increase.
• The maturity stage of a business is the stage at which a business’ marketing and production costs begin to decrease, and the business is generating its highest profits. At the maturity stage, revenue is constant, and operations are efficient.
• The renewal or decline stage is the stage where a product or business line starts to lose market share as a result of increased competition and/or stagnant revenues. It is also known as the cash-cow stage of the business or product, where more investment is not necessary, as further investments may not result in increased sales.

A business faces three considerations for employing a harvest strategy – a reduction or complete cut in capital expenditure and spending, a reduction or complete cut in marketing expenditure, or a reduction or complete cut in operating expenditure. The strategy can also include a plan on new avenues of investment where resources can be channeled to.

Reasons to Employ a Harvesting Strategy

A business may decide to employ a harvesting strategy for reasons including (but not limited to):

• Arrival of a product or business line at the cash-cow or declination stage . Here, marketing the product is no longer necessary, and resources can be allocated to other avenues that may be generating increased revenues.
• Development of new products and other interests . The new product development may require additional resources and investment to encourage increased income generation .
• Discontinuation of a product or business line . As a result of a business’ decision to discontinue a product, further marketing and reinvestment are no longer necessary.

Examples of Harvest Strategies

Below are a few real-world examples of harvesting strategies:

1. Equity investments

Also referred to as an exit strategy, a harvest strategy is a plan for investors to maximize their profits. A common exit strategy in equity investments is listing a company on the stock market – i.e., launching an initial public offering (IPO).

2. Telecommunications sector

A common harvesting strategy for business in the telecommunications sector is the redirection of resources and funds into the development of new technology and brands with notable growth opportunities, instead of allocating resources to technology or products that are becoming obsolete as technology advances.

Additional Resources

CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

• Exit Strategy
• Initial Public Offering (IPO)
• Market Planning
• Product Life Cycle
• See all management & strategy resources
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Harvest Strategy

Published on :

21 Aug, 2024

Blog Author :

Edited by :

Reviewed by :

Dheeraj Vaidya

What Is Harvest Strategy?

A harvest strategy is a business approach to extract maximum profit from a product shortly before discontinuing it. This strategic maneuver optimizes short-term gains, eliminates resource-draining elements, and generates cash flow to support new ventures.

Typically employed when a product reaches its market saturation point, the harvest strategy seeks to maximize profits while minimizing risk and maintaining customer satisfaction, facilitating a seamless transition. This strategy is commonly applied to products, businesses, or assets nearing the end of their life cycle and profitability .

Table of Contents

Harvest strategy explained, advantages and disadvantages, frequently asked questions (faqs), recommended articles.

• The harvest strategy aims to optimize product revenue, eliminate unnecessary elements, and generate funds for new ventures prior to product discontinuation or closure.
• Harvest strategies include passive, active, partial, delayed, selective, liquidation, divestment, gradual, mergers, and employee share ownership schemes.
• Companies employ the harvest strategy in market saturation, loss-making, obsolescence, new product launches, resource constraints, cash flow enhancement, shareholder concerns, exit strategies, market transitions, and risk reduction.
• The primary goal of the harvest strategy is to maximize profits before a product's phase-out.

The harvest strategy is an approach to maximize profits from a product by reducing its expenditures. It finds its origins in the Growth-Share Matrix, introduced by the Boston Consulting Group. Initially designed to bolster shareholder value and confidence within a company, the strategy has evolved to encompass broader applications. Its implementation involves several key steps.

Companies begin by assessing the life cycle of a product pinpointing those nearing the end of their cycle. After identifying a suitable candidate, an in-depth analysis is conducted to evaluate the feasibility of implementing the harvest strategy. This entails calculating research, development, operations, and marketing expenses .

The objective is to extract the remaining value from the product, which entails determining the extent of resource and funding reductions required. Freed resources and investments are then redirected toward newer, more promising products. Customers are informed about these new offerings through strategic marketing initiatives. The harvest strategy is particularly valuable for short-term profit maximization, discontinuing unprofitable or saturated products, attracting new customer segments, and leveraging an existing customer base to introduce new products.

By reassigning resources and intensifying marketing efforts for fresh products, the strategy aids in maintaining competitiveness and interest while averting customer dissatisfaction. Shareholders also stand to benefit from enhanced share value and short-term profitability associated with the product. In essence, a harvest strategy serves as a tactical means to optimize profitability from an aging product while propelling the company forward with innovative offerings.

The harvest strategy has important effects. It can lead to downsides like losing market share , reduced innovation, and impacting employee morale. While it may sometimes boost short-term cash flow and investor confidence, it can also be an exit from a market or product. This helps companies focus on better opportunities and cut spending on weaker products. Yet, it may also cause decreased customer satisfaction and complaints, affecting the financial world. Investors use it for short-term cash, but shareholders might see it as a sign of uncertain long-term growth, innovation, and competitiveness, affecting profits.

Companies have several motives for employing a harvest strategy, outlined below:

• Saturated Product Market:  When the market for a company's flagship product reaches its saturation point or nears its end.
• Loss-Making Product:  If the company is incurring losses in maintaining a particular product.
• Outdated Product:  When a product loses its competitiveness due to becoming outdated.
• New Product Launch:  Companies may use the strategy to introduce an improved product within the same line.
• Resource Allocation:  Shifting resources from an older product to support a new one requires more investment.
• New Market Troubles:  If the company faces financial difficulties in a new market venture.
• Cash Flow Generation:  The strategy may be adopted to enhance cash flow .
• Shareholders' Confidence:  Boosting shareholders' confidence and share value by addressing concerns over declining sales or profits from an outdated product.
• Exit Strategy:  Facilitating an exit from an unprofitable brand, business, or market.
• Market/Product Transition:  Enabling a smooth transition from an existing product or market to a new one.
• Risk Reduction:  Mitigating risks associated with demand decline or uncertain matured product markets.

Harvest strategies are categorized based on a company's market and objectives. They include the following types:

• Passive Harvest:  In this approach, a business or product can naturally decline over time. Investment is reduced, ensuring sustained profitability.
• Active Harvest:  This involves actively reducing marketing efforts and resources for a targeted product or business. It facilitates quicker reallocation of funds to newer opportunities.
• Partial Harvest:  Resources are primarily redirected to a new opportunity or product, with a partial amount retained for the existing product. This maximizes short-term profits while planning for future growth.
• Delayed Harvest:  Resources and funds remain invested in a product or business beyond saturation. This can be due to obligations, commitments, or transitioning to a new product.
• Selective Harvest:  A specific product variant is discontinued while others are retained, streamlining resources to meet customer demands effectively.
• Liquidation Harvest:  This involves ending a product or business entirely and liquidating associated assets, leading to an exit from the market.
• Divestment:  A product line, business unit, or division is sold to focus on core operations and recover investments.
• Gradual Harvest Strategy:  Profit maximization is pursued while gradually reducing resources, marketing costs , and funds.
• Mergers:  Firms merge with another entity to enhance synergies and overall profitability.
• ESOPs (Employee Share Ownership Scheme):  Employees are encouraged to buy shares, eventually transitioning the company into employee ownership.

Let us use some real and fictional examples to understand the topic.

Example # 1

An illuminating case of a harvest strategy unfolds in Microsoft's handling of its Windows XP operating system. Having basked in years of market dominance and success, Microsoft gradually discontinued support and updates for Windows XP. This deliberate maneuver prompted users to seamlessly transition to more contemporary versions, notably Windows 7 and 8.

This calculated shift allowed Microsoft to judiciously channel its resources towards cutting-edge operating systems, all while reaping revenue from these eagerly sought upgrades. In this deft application of a harvest strategy, Microsoft adeptly balanced legacy considerations with strategic innovation, yielding both sustainable growth and customer satisfaction.

Example # 2

Imagine a tech company named InnovateTech made a smartwatch called "EcoWear" that lots of people like. Because many people love their smartwatch, InnovateTech makes a smart decision.

They decide to slow down on telling everyone about the EcoWear watch and spending money on making it even better. Instead, they want to make more money from the smartwatches they've already sold.

This helps them make a bunch of money right now, which they can use to work on making super cool new things like "FutureGadgets." So, even though they're not focusing as much on the EcoWear watch, they're using its success to make new stuff.

It has certain pros and cons associated with itself, as discussed in the below table:

When deciding to employ a harvest strategy, it is essential to consider a range of crucial factors carefully. These include assessing the current position of the product within its life cycle – whether it is in a stage of maturation or decline. Furthermore, understanding the level of competition the product faces within the market landscape is paramount. The financial resources available to the company must also be evaluated, as they play a pivotal role in the successful execution of the chosen strategy.

The implementation of a harvest strategy comes with its own set of challenges and potential hurdles. One significant challenge involves the inherent risk that the product might lose its relevance or diminish in value before the company can fully reap its intended benefits. Additionally, rival businesses' adoption of similar harvesting strategies could potentially lead to increased competition.

It is important to note that a harvest strategy is not necessarily a permanent course of action. In response to shifts in market conditions, businesses have the flexibility to reverse this strategy. In such instances, a company might choose to reinvest in the product, aiming to revitalize its growth trajectory and regain a competitive edge – particularly if heightened demand or intensified competition emerges.

This article has been a guide to what is Harvest Strategy. Here, we explain its examples, types, reasons, advantages and disadvantages. You may also find some useful articles here -

• Tax Loss Harvesting
• January Effect
• Net Operating Loss

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Harvest Strategy

The business, investing, and marketing decision that involves maximizing short-term cash inflows by a significant reduction in research & development, marketing costs, and other miscellaneous expenses

Previously a Portfolio Manager for MDH Investment Management, David has been with the firm for nearly a decade, serving as President since 2015. He has extensive experience in wealth management,  investments and portfolio management .

David holds a  BS  from Miami University in Finance.

What Is A Harvest Strategy?

The bcg growth-share matrix, understanding the harvest strategy, types of harvesting strategies.

The word "Harvest" or "Harvesting" generally has two to three definitions. And, all of them would amount to the meaning of collecting resources for future use. 

Harvesting strategy refers to the business, investing, and marketing decision that involves maximizing short-term cash inflows by a significant reduction in research & development, marketing costs, and other miscellaneous expenses that are depleting the organization's financial resources.

This decision is usually taken to divert the valuable resources elsewhere to a more productive and profitable sector/department. The harvesting strategy is typically used in the case of weak cash cows, question marks, and pets, as defined by the BCG growth-share matrix.

In finance and business, harvesting is an organized practice by which the organization recovers value gained by the entity through the selling of assets or the entire firm as a whole.

The Strategy could be defined as the plan of action. A plan that is designed to achieve the long-term/overall aims of the organization. These collective goals represent the collective soul of the firm.

There are some strategies that an organization can take upon the products and their life cycles.

In marketing, product, and business strategies, the organization can choose to go with the Hold, Build, Harvest, and Divest Strategy, depending upon the performance of the product in the market.

To take these decisions, the management should analyze the product in the light of the  BCG Growth-Share Matrix  to have a better understanding of the product's growth rate and market share .

The growth-share matrix is a portfolio analysis tool developed to aid management in making decisions related to resource allocation.

This helps a great deal in the analysis of new business startups, acquisitions, downsizing, and divestitures. The matrix is divided into a vertical and horizontal axis into four quadrants.

Each quadrant significantly explains the market and growth position of the organization.

The vertical axis is the  Market Growth Rate (MGR)  which is stated in the currency units. It reflects the maturity and attractiveness of the industry and market. This axis explains if the product needs cash.

The cash here is for future expansion needs and to answer the competitive forces with a sound strategy.

The horizontal axis is for the  Relative Market Share (RMS) , which shows the competitive position in the market. Market share can be calculated by dividing the business unit's market share by the market share of the leading competitor.

The four quadrants include the Pet, Question Mark, Star, and Cash Cow segments.

The pet has low RMS and low MGR. The products or business units in this category are weak competitors in low-growth markets.

The question mark has low RMS and high MGR. Products or business units under this section are weak competitors and poor generators of cash in a high-growth industry.

The cash cows have high RMS but low MGR. Products here are strong competitors and cash generators. They have attractive cash flows. Products under cash cows make the firms enjoy high-profit margins and economies of scale .

Lastly, the Star products have high RMS and high MGR. The star products are strong competitors and high-growth markets. The products are highly profitable. Great and attractive financial statements and cash flows.

The portfolio should have a balance between these four types of products. There shouldn't be too many cash cows and stars, and also not too many question marks and pets.

The decision to Harvest is taken to maximize the short-term net cash inflows. Generally, the decision is taken for weak cash cows, question marks, and pets.

Harvesting means zero budgeting for research & development, reducing marketing costs, and not replacing the products and facilities.

The reduction in marketing and R&D costs is made to maximize profits. Implementing the harvesting strategy to a product or product line will help in maximizing profits.

Planning and execution of the harvesting strategy should be done before the end of the product's life cycle. Assuming that every product has its life cycle. A cycle that starts from the idea to warranty and sales services.

When the product is in the "Cash Cow" quadrant, it is safe to say that the product is at the end its life cycle. Making additional investments and pumping funds into marketing at this stage won't be fruitful for the firm.

Thus, decreasing the investments and decreasing the funds in marketing will help the firm save money and maximize profits. In other words, the firm can milk the product to the maximum.

These funds can be used by the firm in the development of new products and different profitable product lines.

There are three important reasons why an organization may employ a harvesting strategy for its product or product lines. But definitely isn't limited to:

• Primarily, the product or product line is considered to be discontinuation. This means that discontinuing a product line will help a great deal in saving costs. Money saved is money earned.
• Secondly, the organization may have identified more important and profitable products or product lines. This will help the firm divert saved resources to this new product line.
• Due to the advent of the latest technology, the product or service is to be considered as obsolete. And the firm needs resources to recalibrate the business process.

There are several options for the way organizations can utilize the harvesting strategy. Or, can use the following techniques to take advantage of the situation to convert such sinking ships into profitable ones.

The organization may choose the strategy that would fit the need and corporate goals and objectives. Each of the strategies has its benefits and limitations.

1. Selling Harvest Strategy

Often referred to as the "exit strategy" is the selling of the firm or the product or service line to another entity. The business owners may ask for a price, and perhaps parties interested in the acquisition may offer a price.

2. Gradual Harvest Strategy

This strategy involves getting rid of all the expenses and costs associated with the product or service line. This is done to focus more on profitable and growth-oriented product lines. The gradual harvest strategy involves the creation of profits or increasing profits through heavy cutting on costs involved.

3. Buyout Strategy

A buyout is a financial condition involving the acquisition of controlling interests in the targeted company. This involves buying/acquiring more than 50% of the firm itself.

The buyout includes the following types:

• Leveraged Buyout
• Management Buyout
• Management Buy-ing
• Institutional Buyout
• Leveraged Buildup

A merger is the coming of two different companies together to form a new company to share a synergistic bond to expand its horizon of expertise.

The expansion of reach, market share, and acquisition of resources might be helpful in future long-term growth. Most of the time, a merger is proven to be beneficial and executed to enhance shareholders' value.

Business mergers are of different types. Some of them are conglomerate, congeneric, and vertical.

ESOP, also known as an employee stock ownership plan, is a type of employee benefit scheme with an option to have an ownership interest in the firm.

IPOs, also known as Initial Public Offering the process of offering shares of a private firm to a public firm in a new stock issuance that facilitates the company to raise capital from public investors.

To execute an IPO , the firm has to be listed on the public stock exchange to trade its share publicly.

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What Is a Harvest Strategy in a Business Plan?

In the excitement of starting a business – preparing the business plan, marketing strategies and budgets – few discuss how the business will end, which is called the harvest or harvesting strategy. They should. Every product eventually becomes obsolete as better, faster, easier or more advanced products replace it. Harvesting strategies can be planned for a product, an entire product line or the business itself, and this planning can make the difference between making or losing money on the way out.

Understanding the Typical Business Cycle

Every product, product line and business goes through four stages, explains an article in Forbes:

• The startup stage at the beginning, when you're tweaking your business model and everyone is wearing many hats
• The growth stage when marketing creates demand, you continue to gain new customers, and existing customer relationships are maturing
• The maturity stage, when operations are smooth and revenue is steady
• The renewal or decline stage, when you should look for new opportunities, innovations and areas to profit, or if revenues aren't growing, think about the best exit plan

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What is the role of a business plan in getting venture capital funding, the advantages of issuing common stock vs. long term debt, growth strategies for starting up a fashion brand, how to market a declining product, what will happen to common stock shares when a company comes out of chapter 11 bankruptcy, explore types of harvest strategy.

There are several methods of harvesting a business. Companies use a harvesting strategy when a business or product reaches the "cash cow" stage, according to Market Business News. This means it is still bringing in money without the need for further investment, and any additional money spent on it would not be enough to justify the cost.

Operating as a "lifestyle company" is one of the types of harvest strategies. This involves taking money out of the company through the years to give yourself a good lifestyle, according to an Entrepreneur article on exit strategies written by Stever Robbins, who co-designed part of Harvard's MBA program and has been involved in numerous startups. If your business is private rather than public, you can pay yourself and partners a high salary or take big bonuses. The downside to this harvesting strategy example is that you won't have this money if you need to invest in the company later, and you'll be taxed on the high income when you take it.

Two other options are liquidating or selling your business, although liquidating should be a last resort when you can't find any buyers. Assuming you have equity remaining in the business – you didn't use it for a high-end lifestyle – the U.S. Small Business Association (SBA) explains that you can sell your business outright, sell gradually by financing the sale, or lease it. Either way, you still get income.

SBA recommends trying different methods to put a value on your business and see which works best in your situation. Common valuation methods are to consider the revenue you have coming in, research the sell price of similar businesses, or subtract liabilities from assets. Instead of selling or leasing, you might transfer ownership – to kids or grandkids, perhaps – so that you're relieved of day-to-day operations but still receive money from the business.

Plan Early for Your Exit

By having an idea of your exit plan while your business is still flourishing, you can avoid making decisions that will cost you more down the road. Putting the strategy in your original business plan makes it official and allows you to work toward it. For example, if your plan is to transfer or sell the business to your kids, you'll naturally want to involve them in the business now, train them in various aspects of the company, and turn it over to them when you know they're ready. Should you need financing at some point, a business plan with a harvesting strategy shows your preparedness.

Entrepreneur's Robbins cautions that if your strategy is to take the company public at some point, have a second strategy in your business plan. It can cost millions of dollars in preparation and fees, and few companies actually become public. It's much more likely you'll build the company enough to earn a decent salary and maybe even find the ideal buyer.

• Entrepreneur: Exit Strategies for Your Business
• Small Business Administration: Close or Sell Your Business
• Market Business News: Harvest Strategy - Definition and Meaning
• Forbes: Business Life Cycle Spectrum: Where Are You?

Barbara Bean-Mellinger is an award-winning writer in the Washington, DC area. She writes nationally for newspapers, magazines and websites on topics including careers, education, women, marketing, advertising and more. She holds a Bachelor of Science from the University of Pittsburgh.

Harvesting Strategy – Definition, Types, and Examples

Businesses and companies allocated marketing budgets and launch promotional campaigns to increase their sales and revenue. When the marketing campaign doesn’t deliver the expected result, then there’s no point in spending resources.

Today, we’ll discuss harvesting strategy, definition, types, and examples. 

Table of Contents

What is Harvesting Strategy?

A harvesting strategy is a plan and management decision to reduce all the marketing expenses to increase the profit. You can develop a harvesting strategy for your business and the product, it serves as the function of an exit plan when the product becomes obsolete. 

The term harvest strategy usually goes for the business line or the brand. However, the harvesting strategy is a part of the company’s business where you decide whether to decrease the marketing budget or cancel it. Management decides to oversee the cost of boosting the sales , if it costs more, then they would leave it. 

The marketers choose to apply the harvesting strategy when they think that the product/service has finished its life cycle. Now, it’s time to extract as much profit as you can. 

When the profit doesn’t meet the marketing expense level, then you should reduce or eliminate all the marketing expenses in order to increase the profitability. 

Understanding the Business/Product Life cycle

Now, the question is how you’re going to know that the product has reached its life cycle and time to apply the harvesting strategy. Therefore, it’s very important to know the various stages in the product life cycle. The life cycle of any product has usually four stages, and they’re as follows; 

Start-up Stage 

The start-up stage is the initial stage, where the business is still going through the developing and growing phase. It requires a huge investment at this stage to develop, market, and launch the product or business line into the market. The goal of the business at this stage is to the general sales by increasing customer market awareness. 

Growth Stage

It’s the stage when the demand for the company’s products continues to increase. Here you increase the production rate in order to make the product accessible to everyone. The attraction of the new customers would keep on increasing and the current customer base would become mature. 

Maturity Stage 

The maturity stage is when the production and marketing cost of your business would start decreasing. The business makes the highest possible profit. The operational system of your company becomes efficient and revenue becomes constant at this stage. 

Decline Stage 

The decline stage is when the business or the product line of your business would start losing market share and the market becomes stagnant due to the increasing competition. This stage also goes by the name of cash cows of your business. Here your company doesn’t need further investment, if you do increase the investment, it won’t make any profit. 

A company follows three harvesting strategies; reducing and completely cutting the capital expenses, reducing or completely cutting the marketing expenses, and reducing or completely cutting the operational expenses. It usually comprises of shifting or channeling the resources. 

Why Companies use Harvesting Strategy

Businesses and companies use harvesting strategy for various reasons and they’re as follows; 

Launching a business line or product at the cash cow stage , it’s the stage where the promotion of your product is no longer useful. You could reallocate the same resources in the other areas, where they could increase more revenue. 

Developing a new product , when you’re working on the development of the new product, then it requires a lot of resources and investment so that it would generate sales and profit. 

Disconnecting the business line or the product , here the management decides to finish the product line and marketing reinvestment is no longer an option. 

Types of Harvesting Strategies with Examples

Some of the main types of harvesting strategy are as follows; 

Cash cow is the mature market stage of the product life cycle where it makes a profit without making any investment. Companies and businesses usually apply a harvesting strategy at the cash cow stage. The management is aware of the fact that the sale won’t increase even after the marketing investment. 

If the company uses the profit on some other project, then it would provide a better return. They usually have three options while applying the harvesting strategy;

• Reducing or eliminating all the capital expense on the product, but keep on using the equipment until it’s out of order 
• Reducing or eliminating all the marketing and advertising budget expense, the loyal customers would keep buying the company’s products without ads 
• Reducing or eliminating all the operation expense, you bear the expense only when the potential return is very high 

Telecommunications

Many telecom companies across the world are shifting their interest from landline telephone to wireless signal technology. It’s because it works even in storms when the landline cable is destroyed. That’s why they’re spending their resources on the development of wireless technology. 

In other words, they’re utilizing the profit of the mature (cash cow) product on the development of the new technology. However, some telecom companies are investing resources in the development of the current product in some areas that still have growth potential. 

Equity Investment

Equity investment has several meanings, it’s the proposed potential plan of any venture capitalist or equity investor, and its goal is to make the maximum outcome from the investment. 

Launching an IPO (initial public offering) of the floating company is a very good example of an equity investment harvesting strategy. IPO usually happens when a company offers its shares to the public and they buy it for the first time. Other investors start buying it in the stock exchange market. 

Conclusion 

Harvesting strategy is usually the plan of private equity investors, venture capitalists, and investors. They call it an exit strategy because they cancel the investment after the success of the project. The goal is to earn maximum profit and utilize the same funds on the other ventures. The time duration of the strategy is between 3 to 5 years to fully recover the investment. 

About The Author

Ahsan Ali Shaw

Implementing a Harvest Strategy for Exiting

1. introduction to harvest strategies, 2. assessing your businesss lifecycle stage, 3. maximizing value before the exit, 4. when to implement your harvest strategy, 5. strategic cost-cutting and asset liquidation, 6. engaging with potential buyers or successors, 7. legal and financial considerations in exiting, 8. communicating the exit to stakeholders, 9. managing wealth and planning ahead.

Harvest strategies are a critical component of any business plan , especially when considering an exit strategy. They involve the careful planning and execution of steps to maximize the value of a business before its sale or transition to new ownership. This approach is not just about reaping the immediate financial rewards; it's about cultivating a sustainable model that ensures the business's long-term health and profitability, which in turn can lead to a more lucrative exit .

From the perspective of a business owner, a harvest strategy might involve streamlining operations, cutting unnecessary costs, or investing in areas that will increase the company's market value. For investors, it could mean timing the sale of shares to coincide with market highs, or gradually divesting to manage risk. Employees, too, have a stake in this process, as a successful harvest strategy can lead to job security and potential financial benefits if the company is sold for a premium.

Here are some in-depth points to consider when implementing a harvest strategy :

1. Assessment of Current Assets : Evaluate what the business owns—intellectual property, physical assets, customer lists, etc.—and determine how to enhance their value.

2. Market Analysis : Understand the current market conditions and how they affect the value of your business. For example, if there's a high demand for your industry, it might be the right time to sell.

3. Cost Optimization : Identify areas where costs can be reduced without impacting product or service quality . This could involve renegotiating supplier contracts or reducing overhead expenses .

4. Revenue Streams : Diversify and strengthen revenue streams. For instance, a software company might move from one-time sales to a subscription model, ensuring a steady cash flow .

5. Strategic Investments : Make calculated investments in technology or personnel that will pay off in the long run. A small tech firm might hire a seasoned CTO to innovate and stay competitive .

6. Exit Timing : Choose the right moment to exit. This could be when the business is at the peak of its performance or before a predicted downturn in the market.

7. Succession Planning : If passing the business to a family member or employee, ensure they are prepared and capable of maintaining its success.

8. Legal and Financial Preparation : Get all the legal and financial paperwork in order, as this can significantly speed up the sale process.

To illustrate, let's consider a boutique winery that's been in business for a decade. The owners decide to implement a harvest strategy by first enhancing the visitor experience , thus increasing direct sales and wine club memberships. They also invest in organic certification, which allows them to tap into a growing market for sustainable products. By the time they're ready to sell , they've not only increased profits but also created a brand that stands for quality and responsibility, making it more attractive to potential buyers.

A well-thought-out harvest strategy is about making informed decisions that align with the business's goals and market conditions . It's a multifaceted process that requires input from all levels of the organization and a clear understanding of the end goal. With careful planning and execution, a harvest strategy can significantly enhance the value of a business, leading to a successful and profitable exit .

Introduction to Harvest Strategies - Implementing a Harvest Strategy for Exiting

Understanding the lifecycle stage of your business is crucial when considering a harvest strategy for exiting . This assessment not only informs you about the current health and viability of your business but also helps in forecasting its future trajectory. Different lifecycle stages—from startup to decline—present unique challenges and opportunities that can significantly impact the timing and method of your exit strategy. For instance, a business in the growth stage may attract different buyers or investors compared to one in the maturity stage. It's essential to evaluate your business's lifecycle from various perspectives, such as financial performance, market position, and operational efficiency, to make an informed decision.

1. Startup Stage : At this stage, the business is just a concept or has recently begun operations. The focus is on developing a product or service, gaining market acceptance, and establishing customer base. For example, a tech startup in its early stages may not be profitable yet, but rapid user growth can indicate potential value to investors .

2. Growth Stage : This is characterized by increasing sales, customer base expansion , and possibly, market share gains. Businesses in the growth stage are attractive for a harvest strategy as they show potential for scalability. For instance, a retail company opening new stores and increasing online sales is a sign of healthy growth.

3. Maturity Stage : Here, the business has a stable customer base and consistent revenue streams. Growth slows down, and operations become more about maintaining market position . A mature business, like a well-established restaurant chain with steady foot traffic, might be ripe for a harvest exit if the market is saturated.

4. Decline Stage : Declining sales, shrinking market share, or outdated products can mark this stage. Businesses in decline need to assess if a turnaround is possible or if exiting is the best option. A classic example is a brick-and-mortar video rental store facing obsolescence due to digital streaming services.

5. Revival/Reinvention Stage : Not all businesses go through this stage, but some may find new life by reinventing themselves. This could involve exploring new markets, adopting new technologies, or pivoting the business model . A company that successfully shifts from producing physical media to offering streaming content demonstrates this stage.

Assessing your business's lifecycle stage requires a thorough analysis of financial reports, market trends, and competitive dynamics. It's also beneficial to consider the perspectives of different stakeholders, including employees, customers, and investors, as they can provide insights into the business's operational realities and potential. By understanding where your business stands, you can better strategize your exit to maximize returns and ensure a smooth transition . Remember, the goal of a harvest strategy is not just to exit but to do so in a way that rewards the years of hard work and investment.

Assessing Your Businesss Lifecycle Stage - Implementing a Harvest Strategy for Exiting

Maximizing value before an exit is a critical component of a successful harvest strategy. This phase is all about enhancing the attractiveness and worth of a business to ensure that when the time comes to sell or transition, the returns are maximized. It's not just about inflating numbers or putting a fresh coat of paint on the company facade; it's a strategic, multifaceted endeavor that requires insight from various stakeholders, including owners, investors, employees, and sometimes even customers. Each perspective offers a unique vantage point on how to bolster the company's value, whether it's through financial restructuring, operational improvements, or strategic positioning in the market .

From the owner's perspective , the focus is often on cleaning up the balance sheet , reducing debt, and showcasing a strong track record of earnings before interest, taxes, depreciation, and amortization (EBITDA). Investors might prioritize strategic acquisitions that can quickly scale the business or enhance its competitive edge. Employees, on the other hand, could drive value by optimizing processes and innovating product offerings , thereby increasing efficiency and customer satisfaction. Customers can indirectly influence value maximization by providing feedback that leads to better market fit and stronger brand loyalty .

Here are some in-depth strategies to consider:

1. Financial Engineering : This involves restructuring the company's finances to improve the bottom line . For example, refinancing debt at lower interest rates or changing inventory management to free up cash flow.

2. Operational Excellence : Implementing lean management techniques or investing in technology to streamline operations can significantly reduce costs and improve service delivery. A case in point is Toyota's Just-In-Time (JIT) inventory system, which minimizes waste and enhances efficiency.

3. Strategic Repositioning : Sometimes, rebranding or pivoting to a new market segment can unlock hidden value. An example is Netflix's transition from DVD rentals to streaming, capturing a larger market share.

4. human Capital investment : developing a strong company culture and investing in employee training can lead to better performance and, consequently, a more valuable company. Google's focus on employee well-being and innovation is a testament to this approach.

5. Customer-Centric Innovations : Engaging with customers to co-create products or improve services can lead to innovations that drive value. Apple's emphasis on user experience has consistently kept its products in high demand.

6. Intellectual Property : Building and protecting a portfolio of patents, trademarks, and copyrights can create a moat around the business, making it more attractive to buyers. Pharmaceutical companies, for example, rely heavily on patent protection to secure their market position.

7. Regulatory Compliance : Ensuring that the company is ahead of industry regulations can prevent costly fines and enhance the company's reputation. The proactive adoption of GDPR compliance by some companies before it became mandatory is a good illustration.

8. Sustainability Practices : Incorporating sustainable and ethical practices can not only reduce costs but also appeal to a growing demographic of environmentally and socially conscious consumers . Patagonia's commitment to sustainability has become a core part of its brand identity.

By integrating these strategies, businesses can not only increase their intrinsic value but also make themselves more appealing to potential buyers or successors. The key is to start early and approach value maximization as an ongoing process rather than a last-minute effort. This ensures that when the exit door opens, the business is not just stepping out but leaping towards a more prosperous future.

Maximizing Value Before the Exit - Implementing a Harvest Strategy for Exiting

Timing the market to implement your harvest strategy is a nuanced endeavor that requires a blend of analytical rigor and intuitive foresight. It's the financial equivalent of picking the perfect moment to pluck a ripe fruit; too early, and you may miss out on potential growth, too late, and the opportunity may rot away. Investors often debate the merits of timing the market, with some advocating for a strategic approach while others warn against the risks of trying to predict market movements . The key lies in understanding the market cycles , recognizing the signs of maturity in your investments, and having a clear exit plan that aligns with your financial goals.

From the perspective of a value investor , the decision to sell is often predicated on intrinsic value calculations. When the market price of an asset significantly exceeds its calculated intrinsic value, it may be time to consider selling. For example, if an investor's analysis concludes that a stock's intrinsic value is $100, but the market price soars to $150 without any fundamental changes in the company's operations, it might signal an overvaluation and a good time to sell.

On the other hand, growth investors might implement their harvest strategy when they perceive that the company's growth rate is starting to decelerate. They look for signs such as slowing revenue growth, shrinking market share, or increasing competition. For instance, a tech company that has been growing at 30% annually but is projected to slow to 10% might prompt a growth investor to exit their position.

Here are some in-depth considerations for timing the market:

1. Economic Indicators : Keep an eye on leading economic indicators such as gdp growth rates, unemployment figures, and consumer confidence indexes. A downturn in these can signal a potential market correction.

2. Interest Rates : Rising interest rates can lead to decreased consumer spending and corporate borrowing, impacting company profits and stock prices. Monitor central bank announcements and policy changes.

3. Market Sentiment : Utilize tools like the Volatility Index (VIX) to gauge market sentiment. A high VIX indicates increased fear, which could be a precursor to market drops.

4. Technical Analysis : Look for technical patterns such as head and shoulders or double tops that might indicate a market peak. setting stop-loss orders based on technical support levels can also help lock in gains.

5. Portfolio Rebalancing : Regularly rebalance your portfolio to maintain your desired asset allocation . This often naturally leads to selling high and buying low, aligning with the harvest strategy principles.

For example, consider the case of an investor who entered the electric vehicle (EV) market early. As the market matures and more competitors enter, the investor's once-dominant EV stock might not hold the same growth potential. If the stock's price-to-earnings ratio climbs to unprecedented levels compared to industry averages, it could be a sign that the market's enthusiasm has outpaced the company's actual financial performance, indicating a good time to sell.

Timing the market for your harvest strategy isn't about pinpointing the single best moment to sell. Instead, it's about recognizing the convergence of multiple factors that suggest your investment has reached its potential, and it's time to reap the rewards. By considering various viewpoints and employing a disciplined approach, you can make informed decisions that align with your long-term investment objectives. Remember, the goal is not to sell at the peak but to exit with substantial gains that reflect your investment thesis .

When to Implement Your Harvest Strategy - Implementing a Harvest Strategy for Exiting

In the realm of business strategy, particularly when considering an exit, strategic cost-cutting and asset liquidation play pivotal roles. This approach is not merely about reducing expenses or selling off company assets; it's a nuanced strategy that involves evaluating every aspect of the business to identify non-core assets and operations that can be divested to improve the company's financial health and streamline its focus towards more profitable areas. This process often requires a delicate balance between maintaining operational efficiency and maximizing the return from the sale of assets. It's a multifaceted endeavor that demands a deep understanding of the market , the value of the company's assets, and the timing of the liquidation to optimize outcomes.

From the perspective of a CFO , strategic cost-cutting is about making intelligent choices that will not compromise the company's long-term growth . It's about distinguishing between what's essential and what's expendable. For instance, a CFO might decide to outsource non-core activities , such as janitorial services or IT support, to reduce overhead costs without affecting the company's core competencies.

On the other hand, a COO might look at asset liquidation as an opportunity to streamline operations. By divesting underutilized equipment or property, the COO can focus resources on areas that directly contribute to the company's primary products or services.

Here are some in-depth points to consider:

1. Identify Non-Essential Assets : Begin by conducting a thorough review of all assets. Determine which are critical to the company's core business and which are not. Non-essential assets could include surplus real estate , unused equipment, or even side businesses that are not part of the core model.

2. Analyze Cost Structures : Examine fixed and variable costs to identify areas where expenses can be reduced without impacting product quality or customer satisfaction . This might involve renegotiating contracts, consolidating suppliers, or implementing technology that automates manual processes.

3. Engage Stakeholders : Communicate with stakeholders, including employees, customers, and investors, to explain the rationale behind cost-cutting measures and asset sales. Transparency helps to maintain trust and can lead to valuable feedback.

4. market timing : The timing of asset sales can significantly affect the proceeds. Monitor market conditions to sell assets when demand is high and prices are favorable.

5. legal and Tax implications : Consider the legal and tax consequences of asset liquidation. Work with legal and financial advisors to structure transactions in a way that minimizes liabilities.

6. Reinvest Proceeds : Decide how to use the funds generated from asset sales. Options might include paying down debt, investing in core business areas, or returning capital to shareholders.

For example, a technology company might sell off a manufacturing plant that's no longer needed due to a shift towards software-based solutions. The proceeds from the sale could then be reinvested into research and development, which is central to the company's growth strategy .

Strategic cost-cutting and asset liquidation, when executed thoughtfully, can significantly contribute to a company's ability to harvest value and prepare for a successful exit. It's a complex process that requires careful planning, stakeholder engagement, and a keen eye for timing and market dynamics.

Strategic Cost Cutting and Asset Liquidation - Implementing a Harvest Strategy for Exiting

Engaging with potential buyers or successors is a critical phase in the execution of a harvest strategy for exiting a business. This process involves identifying and interacting with individuals or entities that may be interested in purchasing or taking over the business. It's a delicate balance of marketing the business's value while maintaining confidentiality and operational stability. From the seller's perspective, it's about showcasing the business's strengths and potential for growth, making it an attractive investment. For buyers, it's about due diligence, assessing risks, and envisioning the future of the business under their leadership . Both parties must navigate this phase with strategic communication, negotiation skills, and a clear understanding of their goals and limitations.

1. Preparation : Before engaging with potential buyers, it's essential to prepare an information package that includes financial statements, business plans, and other relevant documents. This package should present the business in the best light while being transparent and honest about its operations.

Example : A software company looking to sell might include user growth statistics, revenue models, and intellectual property details in their package.

2. Valuation : Understanding the worth of your business is crucial. This involves not just financial valuation but also considering the intangible assets like brand reputation and customer loyalty .

Example : A family-owned restaurant may have a modest revenue but a strong community presence, which adds to its valuation.

3. Marketing : marketing the business to potential buyers can be done through various channels, such as business brokers, industry contacts, or even discreetly within one's professional network.

Example : An entrepreneur might use a trusted broker to approach potential buyers in the same industry without revealing their identity.

4. First Contact : Initial discussions should be approached with caution, often requiring non-disclosure agreements to protect sensitive information.

Example : When first contacting a potential successor, a business owner might only share general information until the NDA is signed.

5. Negotiations : Once a potential buyer shows interest, negotiations begin. This is where the terms of the sale, including price, payment plans, and transition assistance, are discussed.

Example : A tech startup founder may negotiate not just for a good price but also for a role in the acquiring company.

6. Due Diligence : Buyers will conduct a thorough investigation into the business's legal, financial, and operational status. Sellers must be prepared to provide access to detailed records and answer probing questions.

Example : A manufacturing business might undergo environmental, health, and safety inspections as part of due diligence .

7. Closing the Deal : Finalizing the sale requires legal documentation, financing arrangements, and often, a transition period where the seller helps the buyer assume control of the business.

Example : A consultancy firm's deal might include a six-month period where the original owner trains the new management team.

8. Post-Sale Transition : After the sale, there may be an agreed-upon period where the seller assists the buyer in understanding the business operations to ensure a smooth transition.

Example : The founder of a niche e-commerce site might stay on to guide the new owner through the peak holiday season.

In each of these steps, the seller's ability to engage effectively with potential buyers or successors can significantly impact the success of the harvest strategy. It's a nuanced dance that requires patience, strategic thinking, and a willingness to adapt to the needs and concerns of the other party. The ultimate goal is to find a successor who values the business and is capable of taking it to new heights, ensuring a legacy that the seller can be proud of.

Engaging with Potential Buyers or Successors - Implementing a Harvest Strategy for Exiting

When considering exiting a business, the legal and financial considerations are paramount and often intertwined, presenting a complex landscape that requires careful navigation. Legal considerations involve understanding the regulatory requirements for dissolution, potential liabilities, and the transfer of assets and ownership. Financial considerations, on the other hand, revolve around the valuation of the business, settlement of debts, and the distribution of remaining assets to shareholders. Both aspects demand a thorough due diligence process and a strategic approach to ensure compliance with laws and regulations , as well as the maximization of financial returns. From the perspective of different stakeholders—be it the exiting entrepreneur, the investors, or the employees—each group has unique concerns and priorities that must be addressed in the exit strategy.

1. Regulatory Compliance : Every jurisdiction has specific laws governing the dissolution of businesses. For example, in the United States, the Internal Revenue Service (IRS) has clear guidelines on the tax implications of selling a business . It's crucial to comply with these regulations to avoid penalties .

2. Asset Liquidation : The process of converting business assets into cash is often necessary to settle debts. This might include selling real estate , inventory, or intellectual property. An example is the auctioning of office equipment or licensing patents to other companies.

3. Debt Settlement : Businesses must settle their debts before exiting. This includes paying off creditors and ensuring all financial obligations are met. A common scenario is negotiating with creditors for a lump-sum payment that is less than the total debt owed.

4. Shareholder Agreements : The terms of shareholder agreements can significantly impact exit strategies . These agreements often outline the process for selling shares and distributing assets. For instance, a 'drag-along' clause can compel minority shareholders to join in the sale of the company.

5. Employee Considerations : Legal obligations to employees, such as severance pay and notice periods, must be honored. Financially, there may also be negotiations for employee buyouts. A notable example is when a tech startup offers key employees a stake in the company as part of their exit package.

6. Valuation of the Business : determining the fair market value of the business is critical for financial negotiations. This can be done through various methods, such as discounted cash flow analysis or comparable company analysis.

7. Tax Implications : Exiting a business has significant tax implications, both for the entity and the individual stakeholders. Strategies such as structuring the sale as a stock sale versus an asset sale can have different tax consequences.

8. Legal Representation : Hiring experienced legal counsel is essential to navigate the complexities of business exit. Lawyers can help draft and review contracts, negotiate terms, and ensure legal compliance throughout the process.

The legal and financial considerations in exiting a business are multifaceted and require a comprehensive strategy that takes into account the interests of all parties involved. By addressing these considerations systematically and with expert guidance, stakeholders can ensure a smooth and profitable exit from the business.

Legal and Financial Considerations in Exiting - Implementing a Harvest Strategy for Exiting

Communicating the exit to stakeholders is a critical step in the process of implementing a harvest strategy for exiting a business or a market. It's a delicate balance of maintaining transparency, managing expectations, and preserving relationships for future endeavors. Stakeholders, ranging from investors and employees to customers and suppliers, have vested interests in the company's trajectory and deserve a clear understanding of the exit strategy . The communication must be tailored to address the concerns and questions of each stakeholder group, ensuring that the message is not only informative but also empathetic to the implications of the exit.

From the investor's perspective , the focus is on the return on investment and the strategic rationale behind the exit. They are interested in understanding how the exit plan will affect their financial stake and the overall health of their investment portfolio. For employees , the primary concern is job security and the potential for new opportunities within or outside the company. They seek reassurance that their contributions are valued and that there will be support during the transition period. Customers and suppliers are concerned about the continuity of service and supply chain stability. They need to know how the exit will impact their business operations and what measures are in place to ensure a smooth transition.

Here are some in-depth points to consider when communicating the exit to stakeholders:

1. Preparation and Timing : Before announcing the exit, gather all relevant information and anticipate the questions and concerns stakeholders might have. Choose an appropriate time to communicate the exit, avoiding periods of high stress or significant business events that could overshadow the message.

2. Tailored Messaging : Develop different versions of the communication tailored to each stakeholder group. Investors might receive detailed financial projections, while employees might need information about severance packages or job placement services .

3. Delivery Method : Consider the most effective channels for delivering the message. While investors may prefer a formal report or a meeting, employees might appreciate a more personal approach, such as a town hall meeting.

4. Transparency : Be as open as possible about the reasons for the exit and the steps involved in the process. This builds trust and helps mitigate rumors or misinformation.

5. Support and Resources : Provide stakeholders with resources to help them navigate the changes. This could include FAQs, dedicated contact persons, or counseling services.

6. Follow-Up : After the initial announcement, keep the lines of communication open. Regular updates can help ease uncertainty and demonstrate commitment to a smooth transition.

For example, when a well-known tech company decided to exit the smartphone market, they communicated the decision to their stakeholders by first holding a closed-door meeting with investors to explain the financial reasoning. They followed this with a company-wide meeting where the CEO personally addressed the employees, outlining the support systems in place for those affected. Customers and suppliers were informed through personalized emails and phone calls, ensuring that each had a direct line to company representatives to address their specific concerns.

The way a company communicates its exit to stakeholders can significantly influence the perception of the exit and the company's reputation going forward. It requires a strategic approach that considers the needs and perspectives of all parties involved, fostering a sense of respect and collaboration even as the company moves towards its exit. By being thoughtful and thorough in this communication, a company can maintain strong relationships that may prove beneficial in the long term.

Communicating the Exit to Stakeholders - Implementing a Harvest Strategy for Exiting

Exiting a business is a significant milestone for any entrepreneur, but it's not the final step in the journey of wealth creation and management. The post-exit phase is critical as it involves making strategic decisions about managing the newfound wealth and planning for the future. This phase requires a shift from the entrepreneurial mindset to one of a wealth manager, where the focus is on preserving capital, generating sustainable income, and considering the long-term impact of financial decisions on personal and family goals.

1. Asset Allocation: After a business exit, the immediate priority is to ensure that the proceeds are allocated wisely. A common strategy is to diversify investments across different asset classes such as equities, bonds, real estate, and alternative investments. For instance, an entrepreneur who just sold their tech startup might invest in a balanced portfolio where 50% is in stocks, 30% in bonds, and the remaining 20% in real estate and other alternatives.

2. Tax Planning: It's essential to work with a tax advisor to understand the tax implications of the exit and how to manage the wealth in a tax-efficient manner. For example, if the exit results in a large capital gain, strategies such as tax-loss harvesting or investing in tax-advantaged accounts can be beneficial.

3. Estate Planning: Post-exit wealth management should also include estate planning. This involves setting up trusts, wills, and other legal structures to ensure that wealth is transferred according to the individual's wishes and that family members are taken care of. An example here could be establishing a family trust that not only secures the financial future of the next generation but also sets conditions that align with the family's values and educational goals.

4. Philanthropy: Many entrepreneurs choose to give back to society through philanthropy. This can be done by setting up a private foundation, contributing to donor-advised funds , or directly supporting charitable causes. For instance, a successful entrepreneur might allocate a portion of their wealth to fund scholarships for underprivileged students in their community.

5. Lifestyle Planning: With the financial freedom that comes from a successful exit, individuals have the opportunity to plan their lifestyle. This could mean pursuing passions, traveling, or even starting a new venture. It's important to budget for these activities to ensure that the wealth lasts and supports the desired lifestyle .

6. Continual Financial Education: Wealth management is an ongoing process, and staying informed about financial markets, investment strategies, and economic trends is crucial. Engaging with financial advisors, attending seminars, or joining investment clubs are ways to stay educated.

7. Succession Planning: If the exit involves passing on the business to family members , it's important to have a clear succession plan. This ensures a smooth transition and prepares the next generation for leadership roles.

Managing wealth post-exit is a multifaceted task that requires careful planning and consideration of various factors. By taking a holistic approach and seeking professional advice , entrepreneurs can ensure that their wealth is preserved and grown in alignment with their personal and family objectives. The key is to plan ahead, stay informed, and make decisions that reflect both short-term needs and long-term aspirations.

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Complete Guide to Harvest Strategy

A harvest strategy or harvesting strategy is a business plan for either canceling or reducing marketing spending on a product. Marketing executives choose a harvesting strategy when a product has reached the end of its life cycle. They aim to extract maximum profit from any remaining sales.

What is a Harvest Strategy?

Harvest strategy is a business strategy that is used to phase out a product from a market. This is done in an effort to try and continue to sell the product before it becomes obsolete. Harvesting is not a strategy that can be planned ahead of time, it is a reaction to the market that answers the question of when a product should be abandoned. Harvesting is also a steady strategy, not seasonal, so it begins after sales start to fall off and continues until the goods are gone. Harvesting is sometimes made necessary or advisable by a patent or copyright in the product, and this will be the case describe here.

Harvest strategy (also referred to as harvest timing) refers to the decision taken by a firm at the appropriate time to reduce the level of marketing expenditures being made for a product at or near the end of the product’s life while still attempting to collect maximum revenues from the remaining sales.

Objectives of Harvest Strategy

Harvesting has one primary objective: to maximize sales revenue that can be earned from a product before abandoning the product. It’s important to note that harvesting does not guarantee maximum sales revenue from a product, but it provides a good chance of achieving it.

A product is nearing the end of its life if sufficient sales volume to recover costs is unlikely. To determine the appropriate time to harvest a product, one must project when sufficient sales would be obtained to recover costs. This is easily done by considering the strategy and tactics used to market the product as well as the market that the product is sold to. After this information has been collected, the sales that would be required to recover costs can be calculated by multiplying sales volume by average sales prices. This information dictates when to initiate the harvest strategy. For example, if cost recovered goal is 50,000 sales and the product is estimated to only generate 40,000 sales, then harvesting would not be suitable.

Conditions to Consider When Designing a Harvest Strategy

A manufacturer must collect market information regarding the product in order to make appropriate business decisions. This involves monitoring such aspects as sales volume, price levels, promotional activities of competitors, and so forth. All of this information should be considered when designing a harvesting strategy.

There are no specific conditions that apply to harvesting; however, some factors may make harvesting appealing to a manufacturer. These include:

Limitations of Harvesting Strategy

Harvesting can be effective when applied only to a single product or small group of products. Not only does it require detailed market information that may be costly to gather, but gathering that information is not feasible if multiple products are involved in the strategy. When several products are involved, a fallback position for the company to turn to when one product is abandoned is usually necessary.

Growth Strategies

Growth strategies are strategies that are used to increase market share for a particular business. These strategies are not limited only to small businesses, but are used by much larger corporations as well. As long as there is a demand in the market for a certain product, or as long as a product can be made at a cheaper price than the competition, there will always be an opportunity to grow a business.

Some of the more common growth strategies that are used by businesses are:

Product Diversification

Product Diversification, or product line expansion, is a strategy that a company can employ in order to increase their overall sales revenue. Product diversification is when a company produces a variety of products that are related to one another. This may include variety of a certain product as well. For example, an athletic shoe company that produces running shoes, cross-training shoes, walking shoes, and such would be considered to be a company that is diversifying their product line.

Product Diversification allows a company to enter into different market segments as well as increase their gross-margin proportion of the overall sales because they are not selling a single product. There are several strategies that a company can employ to gain market share via product diversification, such as line extensions, brand extensions, and category extensions.

Line Extensions

Line extensions involve the addition of new products to an existing product line. Line extension may involve making a few changes to a product that already exists, or it may involve taking a product that was previously marketed in a completely different market segment and entering into the one the new product is being introduced into. For example, a line extension may be used to create a children’s version of the product. Another example would be the introduction of a higher version of the product, claiming that it is more advanced.

Brand Extensions

A brand extension is used by a company to extend their brand attributes to other products outside of the current product portfolio. New products that are introduced via brand extension are directly related to the brand.

Brand extension would not include products that simply share the same consumer segment as the main product portfolio. The new products introduced under brand extensions are always extensions of the brand identity.

Category Extensions

Category extension occurs when an existing product is repositioned. Instead of positioning the product for an existing market (extra small cars), a new market segment is targeted, with a different set of consumers (midsize cars). Therefore, a new product is introduced into the new market segment.

Advertising

Advertising is a type of marketing communication that is used to inform or persuade an audience to take an action regarding a product or service. With product advertising, a company is trying to inform their potential audiences of the products that they make. If a company wants to advertise a product that is not currently being sold to the public, they would engage in a type of advertising called product line advertising to inform the public of their product.

There are several types of product advertising, such as product sampling, product demonstration, and product exhibitions.

Product Sampling

Product sampling is a strategy that is used to allow a potential consumer to evaluate the product prior to making a purchasing decision.

Product Demonstrations

Product demonstrations are often a necessary part of product sampling. Product demonstrations take place in front of or around the product itself in order to show and explain how the product works.

Product Exhibitions

A company can choose to not only use advertising as a source of information about their products, but they can also choose to break them and set them up as well.

Businesses spend billions every year spreading the word and fostering the growth of their brand through advertisements, commercials, product samples, and demonstrations which provide information and create awareness for consumers to make a purchasing decision. Often times businesses will use promotions to generate traffic to their own website or onto social media.

Word-of-Mouth

Word-of-mouth is a strategy that is used by business to create a brand image. Word of mouth advertising is for a company to get consumers to advertise their product. The company would get the consumers to talk positively about the product to other people. Therefore, people will become interested in the product and go out and buy it. Word-of-mouth is not limited to online forms of communication such as social media, but also focuses on face-to-face communications such as phone calls or even casual meetings.

Public Relations

Public relations is not a directly profitable method of generating sales. However, there are several reasons why one should consider using the public relations strategy for their business.

Public Relations is not a directly profitable method of generating sales. However, there are several reasons why one should consider using the public relations strategy for their business.

If you are involved in a tight advertising budget, or you’re a business too small to pay for ads or if your niche isn’t profitable to advertise to, then public relations can be a very beneficial strategy for you to use.

The main idea behind public relations for a business is to focus on interesting aspects of the product. Interesting aspects of the products can range from interesting insides to even just showcasing non-product related items in order to promote products.

For example if your business is selling large, mainframe computers; you could create stories about employees who use the computer to do amazing things such as winning a chess tournament, creating a festival of art, and etc.

Responses To Public Relations

There are several different responses that a target audience can have to a product.

Response Directly Related To A Product

A consumer might say that a product is a good product for a certain demographic, such as teens or older generations. A consumer might also say that the product is a bad product for his/her own demographic.

Response Contradicted By Other Consumer/Response

Sometimes, people say that they like a product, but they show signs that they do not like the product. The information gathered could be blatant contradictions, such as saying, “The product is great!” but “I will never buy it.” Or it could be subtle contradictions, such as, “The product is good, but I would never buy it with the price that it is.”

Response That Causes The Consumer To Think

A consumer might say that they would buy the product if the price was lowered, but they will still not be completely satisfied with the product. Or, a consumer might say that they will not buy the product with the price that it is based off of the information that they have. A consumer might also mention how they will never consider buying the item, but might change his/her mind later. For example, a consumer might say that he won’t buy pasta from a certain brand. He might even say he considers it inedible. However, he might buy it the next week.

Measuring Business Growth

How do you know if business is booming? This question can be effectively answered by the positive response to the marketing strategy resulting in long term growth of a company. In order to understand the value of business growth, it is necessary to obtain an understanding of specific business models. There are a number of business models used for overall profits. The vast variations of each type of business model is the basis for dividing your business’s marketing approach by the model the competition uses.

Capital Expenditure

This type of business model is primarily used by service industries who have low ability to transport products. With this model, you provide the product to the consumer. The customer pays only for usage and often pays a deposit at the start for usage measurements. Most service industries have customers who pay in advance. The term “capital expenditure” refers to the arrangement of depreciating the initial cost of the service over the length of the contract by spreading the cost. Different businesses will assign different cost over the course of the contract. This type of service business model will include the following service oriented factors:

• Fixed costs
• Variable costs
• Recurring costs

Ask yourself the following questions in regard to your business model questions:

How does the capital expenditure business model differ from the cost-plus pricing model?

What are the advantages and disadvantages of the capital expenditure business model compared to the other business models?

If you were in charge of implementing a new business model for your company, which type of model would you implement, and why?

Cost Plus Pricing

Cost-plus pricing is a business model that calculates costs along with potential future profit, and adds a markup to come up with a price. Pricing products holding this model is pretty simple; prices are set based on the cost of the product, plus a percentage representing the company’s desired profit. Ask yourself the following questions in regard to your cost-plus pricing model questions:

What are the advantages and disadvantages of the cost-plus pricing model compared to the other business models?

How does the Cost-plus pricing model differ from the capital expenditure business model?

Relationship Selling

Relationship selling, or consultative selling is a sales strategy that focuses on building trust and a relationship between the salesperson and customer. This strategy is mainly used by sales people who make their commissions in the form of a percentage of the gross revenue and not simply on the volume of sales they make. There are several different aspects to a relationship selling approach:

• Building trust
• Based on trust and relationship
• Long term commitment
• Comprehensive selling
• High perceived benefits

There is a specific amount of time and effort required by both parties to establish a solid relationship.

Ethos or Image

Usually a company’s ethos or image is defined by the public. The public will judge your company based on different aspects of your business such as your ethical values, quality of products and services, and how you relate with your customers. Ask your students the following questions regarding your ethos or image questions:

How do you define your company’s ethos/image?

What are the advantages and disadvantages of an ethos or image that is based on trust and relationship?

If you were in charge of the image of your company, what would you do to change it?

Endorsement

Many endorsement companies like Quaker Oats, Microsoft, Apple, IBM, and Kellogs are large enough to have marketing strategies directed at the overall public via TV commercials, but with no intended customer segment. Their marketing strategy is very large scale and targets a market of consumers who are not loyal to any one product. The endorsement companies market their product to the public and ask the consumers what their opinions are on their product. Ask yourself the following questions in regard to your endorsement questions:

What are the advantages and disadvantages of relying on your public’s endorsement as a marketing strategy?

If you were in charge of hiring someone to endorse your company’s products, what sort of characteristics would you want to see from them?

Personal Selling

Personal sales is the art of making face to face calls to potential customers and attracting them to the positive aspects of your product or company. This often requires listening to their concerns and questions and addressing them effectively. In the process of doing this, the salesperson needs to be confident and competent in his/her product.

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Harvest strategy – definition and meaning

A Harvest Strategy or Harvesting Strategy is a business plan for either canceling or reducing marketing spending on a product. The management has decided that it would cost too much to boost sales. In other words, they could not justify the expense after considering likely future revenues from the product.

The term ‘harvest strategy’ may also refer to a brand or line of business.

Marketing executives choose a harvesting strategy when a product has reached the end of its life cycle. They aim to extract maximum profit from any remaining sales.

Put simply; the product sells thanks to its goodwill and nothing else. Goodwill refers to the established reputation of a product .

MbaSkool.com says the following regarding a harvest strategy:

“When the revenue made by additional investment would not overcome the expense, all marketing investment in a particular business line is reduced or eliminated, as sales revenue falls below a cutoff point.”

When a product reaches the end of its life cycle, spending on advertising and marketing may be a waste of money. The company will get a much better return on investment if it spends on relatively newer products.

Harvest strategy – cash cow

Companies use a harvesting strategy when a product has reached the cash cow stage. Cash cow refers to a product that makes a profit in a mature market and does not need heavy reinvestment.

It is unlikely that sales will increase even if the company invests further in the product.

There would be a much better return-on-investment if profits were spent elsewhere in the company.

When implementing a harvest strategy, the company has three options:

• Eliminate or reduce all capital spending on the product. In other words, keep using existing equipment until it no longer works.
• Reduce or eliminate marketing and advertising expenditure . New sales will rely on brand loyalty.
• Eliminate or reduce operating expenses . In other words, only approve expenditure when the return on investment is very high.

A harvest strategy may also reflect a company’s environmentally sustainable approach by reducing the resource intensity of products that are phasing out of the market.

Harvest strategy – telecommunications

A Money-Zine article cites the telecommunications sector . As more areas across America have wireless signals, the need for a landline telephone declines.

Telecom companies continue supporting landline technology. However, they do not rebuild wired networks when storms, for example, destroy them. They focus their expenditure on expanding wireless coverage.

In most cases, businesses use the profits from their ‘mature’ brands to fund the development of new ones. They may also invest profits in existing products that they believe have good growth potential.

By reallocating resources from mature products, companies can capitalize on the opportunity to innovate and gain a competitive edge in emerging markets.

Harvest strategy – equity investments

In the world of equity investment, the term has a different meaning. It refers to a proposed plan for private equity investors or venture capitalists. The aim is to get the most profit from their investment.

For equity investors, floating a company, i.e., launching an IPO, is an example of a harvest strategy. IPO stands for I nitial P ublic O ffering . An IPO occurs when the shares of a company become available for the public to buy for the first time. Investors can buy and sell that company’s shares on a stock exchange.

Another example is to sell the company in which the investor has a stake.

“Harvest strategy” – vocabulary and examples

There are many terms in English closely related to “harvest strategy,” especially compound nouns. A compound noun, such as “harvest strategy planning,” is a term consisting of at least two words. Let’s take a look at some of them, their meanings, and how we can use them in a sentence:

Harvest Strategy Implementation

The process of putting a harvest strategy into action within a company. Example: “The firm’s harvest strategy implementation involved scaling back on production while maximizing the remaining inventory turnover.”

Harvest Strategy Planning

The phase where a company develops a harvest strategy, considering the product’s lifecycle and market conditions. Example: “During the harvest strategy planning meeting, the team decided to discontinue further R&D investment in the aging product line.”

Harvest Strategy Assessment

An evaluation to determine the effectiveness of a harvest strategy in meeting financial goals. Example: “An annual harvest strategy assessment is conducted to ensure that the diminishing returns from the product still align with the company’s profit objectives.”

Harvest Strategy Metrics

The set of quantitative measures used to evaluate the performance of a harvest strategy. Example: “The board reviewed the harvest strategy metrics to decide whether to continue the product line or divest.”

Harvest Strategy Decision

The conclusion reached by a company to either initiate or conclude a harvest strategy for a product. Example: “The management’s harvest strategy decision was influenced by the sharp decline in the product’s market share.”

Harvest Strategy Timeline

The schedule that outlines the duration and key milestones of a harvest strategy from inception to completion. Example: “The project manager created a detailed harvest strategy timeline to ensure a smooth transition during the product phase-out period.”

Harvest Strategy Analysis

The in-depth study and examination of a harvest strategy to determine its potential outcomes and impacts. Example: “A thorough harvest strategy analysis revealed that continuing with minimal support could still yield a modest profit margin for the next two years.”

Video – What is a Harvest Strategy?

This video, from our YouTube partner channel – Marketing Business Network – explains what a ‘Harvest Strategy’ is using simple and easy-to-understand language and examples.

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Profit Harvesting Strategy: What It Is, How to Implement, and Key Considerations

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Harvest strategy in technological industries

Challenges in harvest strategies, special considerations: harvest strategy for investors.

• Maximizes profits from mature products
• Facilitates funds for new product development
• Optimizes resource allocation
• Enables a strategic transition to innovative offerings
• Serves as a planned exit strategy for investors
• Potential loss of market share
• Risk of overlooking emerging market trends
• Requires precise timing and execution
• Possible negative impact on overall company performance
• Challenges in managing the transition from mature to new products

Frequently asked questions

Why is the cash cow stage significant in a product’s life cycle, how do companies determine the optimal timing for a harvest strategy, what are the potential drawbacks of overlooking market trends in a harvest strategy, how can investors ensure a successful harvest strategy, key takeaways.

• A harvest strategy maximizes profits from mature products.
• Funds generated during the harvest phase are crucial for new product development.
• Optimizing resource allocation is a key advantage of implementing a harvest strategy.
• Companies need to carefully time and execute the gradual elimination of products.
• Investors use a harvest strategy as a planned exit, with options like selling the company or an IPO.

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Harvest Strategy

What is a ‘harvest strategy’.

A harvest strategy is a business plan for reducing or completely eliminating investment in a particular product, brand, or business line because a company’s management has determined that the expense of attempting to boost sales any further would not be justified by the likely future revenues from the product or brand line. A harvest strategy is a business plan for reducing or completely eliminating investment in a particular product, brand, business line.

In most cases, a harvest plan is used after a product or brand line has attained cash cow status, which is the stage of product maturity beyond which a product is unlikely to see substantial sales increase through continuous expenditures in sales and marketing efforts.

The phrase “harvest strategy” refers to the process by which a firm aims to harvest revenues from a cash cow in order to support investment in product development or sales and marketing activities for other goods with greater potential for sales growth.

Explaining ‘Harvesting Strategy’

Companies often use the earnings from established brands or product lines to support the market development of new brands or the expansion of current items that are believed to have strong growth potential in the marketplace.

Using the Coca-Cola corporation as an example of a harvesting strategy, the firm may decide to lower investment in promoting its established soda brand in order for cash to be directed into sales and marketing activities geared to promote its range of energy drinks instead.

When a pharmaceutical company determines that an established medication it sells has reached the point of market saturation, it can no longer be used as a cash cow, and that it would be more productive to use the profits from that product to fund research and development or marketing efforts for other medications, it employs a harvest strategy plan known as a cash cow strategy.

Harvesting strategy example

When it comes to investments, there are various harvesting strategy that can be employed. For example, investors may use loss harvesting to minimize their taxable income by selling securities that have declined in value.

On the other hand, gain harvesting involves the strategic sale of appreciated assets to minimize tax obligations and maximize returns. It is important to carefully consider which harvesting strategy is best for a given investment portfolio, as well as the timing of such actions. Consulting with a financial advisor can help investors make informed decisions about how and when to harvest assets in order to optimize their financial goals.

An Alternative Meaning of Harvesting Strategies

With respect to equity investments, harvesting strategy refers to a planned plan for investors, such as venture capitalists or private equity investors, to reap the benefits of their equity investments.

One of the most typical harvesting strategy for equity investors is either a plan to sell the firm in which they have invested to another company or a plan to make an initial public offering (IPO) of the company shares.

Harvest Strategy FAQ

What are harvesting options.

Harvest strategies are business and marketing tactics that entail decreasing or canceling marketing expenditures on a product in order for the firm involved to make the most money possible. Companies may choose from a variety of harvesting strategies.

What is the significance of harvest strategy?

A harvest strategy is a determined choice to limit all sorts of expenditure on a given product in order to maximize profitability, notwithstanding the possibility of a reduction in market share in the short term. A product or business line strategy may be devised, and it can also be used as a 'exit' plan for the company.

Further Reading

• Optimal harvest strategy for slash pine plantations: the impact of autocorrelated prices for multiple products – academic.oup.com [ PDF ]
• Reconciling approaches to the assessment and management of data-poor species and fisheries with Australia’s harvest strategy policy – www.tandfonline.com [ PDF ]
• Health economic impacts and cost-effectiveness of aflatoxin-reduction strategies in Africa: case studies in biocontrol and post-harvest interventions – www.tandfonline.com [ PDF ]
• To grow or to harvest? Governance, strategy and performance in family and lone founder firms – www.emerald.com [ PDF ]
• Financial viability of Penaeus setiferus versus Penaeus vannamei with continuous live harvesting and one final harvest strategies in South Carolina – dc.statelibrary.sc.gov [ PDF ]
• Incorporating social objectives in evaluating sustainable fisheries harvest strategy – link.springer.com [ PDF ]
• Economic and financial analysis of harvesting and utilization of river reed in the Okavango Delta, Botswana – www.sciencedirect.com [ PDF ]
• Dual-track versus single-track sell-outs: An empirical analysis of competing harvest strategies – www.sciencedirect.com [ PDF ]
• Mixed forests and a flexible harvest policy: a problem for conventional risk analysis? – link.springer.com [ PDF ]
• A concept for the calculation of financial losses when changing the forest management strategy – www.sciencedirect.com [ PDF ]

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What Is a Harvest Strategy in a Business Plan?

by Devra Gartenstein

Published on 4 Jun 2019

Sometimes, you invest heavily in marketing your products so you can launch them and build brand awareness among current and potential customers. Other times, you can sit back and reap the benefits of the time and resources you've already invested. A harvest strategy in a business plan makes sense at the proper moment in your product's life cycle when you have inventory to deplete, and your creative energy is going toward other products.

A harvest strategy in a business plan is a decision to coast on past marketing investments by relying on a brand awareness you've already built to sell your products.

Reasons for Using a Harvest Strategy

• Discontinued product. If you're planning to discontinue a product, there is no reason to direct marketing resources toward it. However, you may have made the decision to discontinue while you still have plenty of stock on hand. By harvesting the venture, you are able to sell down inventory, bringing in returns on marketing work you've already done.
• Other interests. If your business is putting time and money into developing new products, there is more need to generate income from these investments than from products that have been around for a while and have already paid off your initial marketing efforts. The harvest potential for selling tried and true products is a valuable opportunity and should be a low-key component of your overall marketing mix.
• Cash cow. If your product has caught on to the point where it has become a classic or a staple, you may not need to market it much. You can use your resources more effectively elsewhere, or you can simply withdraw your earnings as profit rather than reinvesting in the business.

Harvest Strategy Process

Your harvest strategy will work differently if you're discontinuing a product rather than relying on its past success. If you're taking your product off the market completely, you'll also stop investing resources in materials and production. You're interested in clearing your shelves for new opportunities as much as earning some extra money from inventory you already have. You may even reduce the price for clearance to move as much of it as possible.

If your product is a cash cow, and sales are steady without continued marketing investment, you'll keep producing even though you're not marketing. The marketing investment just isn't necessary anymore, but if you don't keep manufacturing, you won't have any product left to sell.

You may also choose to reduce or eliminate spending on capital improvements such as new equipment or equipment repair. Your decision whether or not to do so will depend on the return you expect to receive on this investment and whether the product is still selling well enough to justify it.

Advantages and Disadvantages of Harvest Strategies

A harvest strategy earns you income with minimal investment. This maximizes profit and also frees up resources for other endeavors. Whether you're exploring new entrepreneurial activities or spending more time with your family, a harvest strategy is an opportunity to move ahead without giving up the revenue that your product can still provide.

However, if you switch to a harvest strategy for a product that still has some life left in its cycle, you may lose the opportunity to earn as much as you could if you continued with your marketing efforts. Your lack of enthusiasm for the product could also create a self-perpetuating cycle, making your offerings less interesting to your customers as well. The success or failure of a harvest strategy often comes down to whether it is implemented at the right time and in the right way for the right product.

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What Is Harvesting Strategy in Business?

January 24, 2021 | By Hitesh Bhasin | Filed Under: Strategy

A harvesting strategy is basically a plan that is used in the field of business industry which involves either canceling or cutting down the expenditure on a particular product . Usually, this type of decision is taken when the companies or the business entities that are manufacturing that particular product stops yielding any more profit or it costs too much in order to boost the sales.

This type of decision is taken in order to help the companies overcome their losses or prevent them from happening. Normally in such a decision, those products are canceled which seems to be in its older stages where the demand for that product decreases or become outdated according to the latest trend.

 So when the products are towards the end of their lifecycle, where they have very fewer demands among the customers that are the time when the companies decide to stop the production of that product by preventing investing more money into it.

It is usually a wise decision to take because in this the production of such a product is reduced or even terminate which promise for either less or no product revenue. If they keep investing in such a product, it would only rise up the expenses and may not result in any profitable output.

In general, the term harvesting strategy is nothing but well-planned discontinuation of the entire product line when it becomes difficult to extract profit from. Also not just the product line but sometimes the entire sector of any companies can be terminated for once and for all if it feels like it is not generating profit for the company anymore. Thus this stagey allows the marketers to eliminate the marketing expenditures on that product.

Now generally, this harvesting strategy is used at times when the revenue that is made by an annual investment is unable to overcome the expenses that are associated with it. In cases like these, then all the product line or the businesslike is eliminated.

The sales revenue decreases even below the cut-off point, which carries gives the sign that a certain product line or the business line needs to be terminated.

Thus the idea of the harvesting strategy is used when the products or the entire business reaches the stage of ‘ cash cow ’.  The ‘cash cow’ is a term which is used to refer to a situation when the product or the business seems unlikely to grow any further or contribute in the growth of the entire company, even when enough of the investment is made into that.

Thus those businesses which are likely to be more successful or show strong promises of becoming a success, then those extra revenues that are generated can be used for the purpose of increasing the performance of the other weaker sectors of the business.

Also many at times people tend to confuse the harvesting strategy with the exit strategy . But it should be noted that both the two terms are completely different. An exit strategy refers to the selling of an entire company and exiting the market .

This is considered to be the extreme version of the harvest strategy. While in harvest started one a particular product line or a particular sector of the business is terminated or reduced but the company still continues to manufacture other products or other sectors of that particular company.

Table of Contents

Examples of Harvesting strategy

Now so far we have learned that the term harvesting strategy usually means terminating a product or reducing its manufacturing. Now that we have understood what the harvesting strategy is let us take an example to understand it in a more simplified way.

So for example, two people Marie and Jessie together opened a commonly named XYZ. Then they both together invest their time and money all of their harbored into growing that product. In no time their company lifts up and after say 15 years, the company grows to a value which is beyond $200,000. It is a clear sign that the company is going really good.

Then all of a sudden and another company with the name ABC comes and offers to give $16 million in order to buy the company. Now here to both the two people Marie and Jessie agree with the deal and sell the company at $16 million. Now they divide it in 50 – 50 between them. Thus this is a perfect example of how the cash transaction allowed them to harvest the sweet fruit of abundance of money after their years of hard work and dedication. This way both the two ladies are able to harvest tier investment that they have been making for so many years in their company.

Thus harvesting does not always mean terminating a business. Although the main object of harvesting is always profitability.

Now let us consider a situation where harvesting strategy is used but not in the form of merger. In this case, the investors who have been making an investment in their company can choose an alternate option to harvest their success. This can be done via the IPOs. The IPO stands for Initial Public Offerings of Stocks or the sales of their positions to the third parties.

What are the different options that a person has when he chooses harvesting strategy?

The situation in which the commonages have to choose the harvesting strategy also depends a lot on the interest of the customer on that particular product. Now suppose that if a product has been ruling the market for quite some time now. But after some time a new product comes in the market which does the same function but is a more advanced version of the previous product.

This case, the crony may decide to terminate the launch of that particular product as it has become outdated and hence not invest in it anymore. But now the question arises that if they take the decisions of the harvest strategy, there are several options they can opt to implement this strategy-

• The first option is that they can lower or simply eliminates the expenses that go into advertising . And then they can rely on brand loyalty so that new seals can be generated by them.
• The second option is to either lower or just eliminate the new expenditures that arise due to the capital. This way they can allow the already existing equipment to run to failure.
• The third option for them is to simply eliminate or at least lower the risk of the operating expenses. They can choose to spend the money whenever the payback on a certain new investment goes really high.

What is the importance of harvesting strategy?

The harvesting strategy holds quite important as it helps a company to prevent the losses in terms of businessman marketing. This is because the harvesting strategy allows terminating a product line that no longer generates profitable output.

This way the companies can stop investing more in them and instead invest this money into their other products to make them better. Most of the times the harvestings target is applied to usually those products when demand starts decreasing either due to the decreasing interest of the customer in that product or due to the launch of a more better and an updated version of that product.

In scenarios like this when the product demands decrees, it is said to have arrived at the end of its lifecycle. Now, this is where the harvesting strategy comes into play. It allows the business owners to simply stop the products of goods that are not profiting them anymore. Also in some cases, the harvesting strategy may mean something else.

Now in some cases, people merge their companies with anther more beige one instead of some money. This also comes under the harvesting strategy in which the smaller companies are sold to some bigger companies who find an interest in them. This way the harvesting strategy brings a lot of profit to the owner of the business.

It also helps them in reducing the chances of losses because once they understand which products are not helping them grow, they can exclude them out. Thus in this way, the harvesting strategies are of great help.

Harvesting strategy allows the entrepreneurs and inventors to make out the maximum out of the business they are investing in. It is basically a reward for the hard work and the innovation that the investors have been putting in to help their business grow.

Thus, the harvesting stagey is considered being quite a smart approach in the field of business. It prevents the losses that the business may incur in the future and thus helps the business grow into a profitable one.

Liked this post? Check out the complete series on Strategy

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• Difference between Strategy and Planning – Strategy versus Planning
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• What is the Importance of strategy to a Business or an Organization?
• What is Growth Strategy in Business? Types and Steps
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• Mintzberg’s 10 school of thoughts for Strategy formulation – School of thoughts in management

About Hitesh Bhasin

Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.

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How to Implement Harvest Strategy in Business

Harvest strategy, New Market entry, and business plan are studied in the last session. These sections have helped me to learn about how to enter a new market, when to implement harvest strategy and how to make a business plan.

A harvest strategy is the plan to close business within a stipulated time and maximizing profit over this time. The decision regarding the time of exit from the business is to be planned. “A Harvest Strategy is also known as an asset Reduction Strategy and is a means by which an organization seeks to limit or decrease its investment in a business by extracting as much cash out of its operation as possible. It steers a middle course between maintenance and abandonment. Reinvestment in the business is minimal.” (Definition Harvest Strategy: Description. 2009).

The strength of employing a harvest strategy is required to evaluate and adopting of harvesting strategy is essential when there is an unattractive or declining market trend where the business is not seen as a major component of a firm’s portfolio. In the strategic planning process, a harvesting plan is also to be made in meeting the crisis and reducing the risk of huge losses. The strength of the harvest strategy is that it allows a time frame that can be extended based on the business profitability.

The value proposition is the unique features of the product or anything related to the company that distinguishes the company from its competitors.

“Value proposition is what makes customers choose you, instead of the competition. It’s part marketing, part operations and part strategy.” (Richards 2009).

A business plan is a guideline for managing the business in profitable ways. It is a written description of the future business. “A business plan is a formal statement of the business goals, their justifications and the procedures planned to be undertaken to achieve those goals.” (Business Plan).

At the time of the selection process of staff personnel, a business plan will act as a basis for setting up selection criteria. Thus best team members suitable to the business objectives can be selected. It explains the purpose of the organization. By establishing a vision in the business plan it can persuade others to contribute to achieving the vision. A business plan can be used as a yardstick for measuring the operational performance of employees and managers.

Managers can utilize the business plan according to the business goals. Managers can use the business plan for the transmission of their vision to potential ideas. Potential ideas can be adopted for business development.

Newmarket entry involves changes in the Business Environment. Changes in the environment should reflect the Marketing Plan of the company. In such a situation company will have to focus on issues like Cost leadership marketing strategy, Product Differentiation strategy, Focus strategy, Pricing strategy, Promotional strategies, Product distribution, Human resources strategy, Financing strategy, and growth plans.

“Executives constantly look at new market entry opportunities as a way of generating rapid growth, diversifying their portfolios, and (occasionally) secretly satisfying their entrepreneurial spirit. Newmarket entry strategies enable companies to improve their revenue base by entering into new geographies, to solidify relationships with existing customers by extending their product offerings, and to diversify their customer base by targeting different customer segments.” (New Market Entry. 2009).

In the last session of the module, I have learned that attention must be made before entering into the new market. I also studied the importance of changes to be adopted in the changing business environment. I have learned that the main strength of the company is a well-defined structure and professional expertise. Opportunities in the new market can be utilized for gaining market share. The study shows that entry to the new market will offer profitability and growth. A marketing plan is required to be changed according to the changing business environment. The company is required to focus on growth and marketing plan and that should be based on environmental changes. While managing the business environment, the company’s vision, mission, and strategic planning must be focused.

A business plan shows that there is plenty of opportunities for the growth and development of the firm after entering into the new market. Organizational experience, knowledge, and skills are essential for acquiring success in the new market. Employees are important in bringing success to the firm. Employee retention is important in bring organizational success. It is also seen that organization is having good experience and service knowledge in the field to enter into the new market.

Bibliography

Business Plan . [online]. Economy Watch. 2009.

Definition Harvest Strategy : Description . (2009). [online]. 12Manage: The Executive Fast Track. Web.

New Market Entry . (2009). [online]. Bridge Strategy Group. Web.

RICHARDS, Daniel. (2009). Writing a Business Plan-Business Concepts and Value Propositions .

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The Business Lifecycle Matrix: A Guide to Harvest, Build, Grow, and Exit Your Business

Discover the Business Lifecycle Matrix: Four key phases - Harvest, Build, Grow, Exit - guiding businesses from inception to a successful transition. By understanding each phase's unique challenges and opportunities, entrepreneurs can make informed decisions to ensure successful business transitions.

StrategyPunk

Introduction

The first phase is the Harvest phase, which focuses on maximizing profits and minimizing costs. This is typically the final phase of a business's lifecycle when the owner wants to exit the business. The Build phase is when the company is just starting, focusing on establishing the business and building a customer base. The firm has established itself in the growth phase, focusing on expanding and growing the business. Finally, the Exit phase is when the business owner wants to sell or transfer the company to someone else.

Keep reading to learn more about each phase and how to implement the matrix in your business.

Understanding the Business Lifecycle Matrix

The Business Lifecycle Matrix consists of four stages: harvest, Build, Grow, and Exit. Each step represents a different phase of the business lifecycle and requires different strategies and tactics to succeed.

The Maturity phase is the third stage of the Business Lifecycle Matrix. At this stage, your business has achieved stable growth and profitability and is focused on maintaining its position in the market. Concentrating on optimizing your operations, developing new products and services, and building strong customer relationships will help.

The Business Lifecycle Matrix: Harvest Phase

Congratulations! You have reached the Harvest Phase of the Business Lifecycle Matrix. This phase is about reaping the rewards of your hard work and maximizing profits. In this phase, you will focus on selling your business or divesting certain assets to generate cash flow.

A critical aspect of the Harvest Phase is ensuring you have a solid plan for using the cash generated from the sale of your assets. You can reinvest the money into another business venture or use it to fund your retirement. Whatever your plans, it is essential to have a clear strategy in place.

The Business Lifecycle Matrix: Build Phase

During the Build phase, you must focus on developing your business model and creating strategies to help you achieve your goals. This is the time to invest in resources, such as hiring new employees or upgrading your technology, to help you grow your business.

Overall, the Build phase is an exciting time for startups and businesses. It is a time to invest in your business and watch it grow. With the right strategies, resources, and planning, you can establish a strong market position and achieve your goals.

The Business Lifecycle Matrix: Grow Phase

To achieve rapid growth, you'll need to expand your product offerings. This can be done by introducing new products or services that complement your existing offerings. Before launching your latest products, it's essential to conduct market research to ensure that there is demand for them.

Overall, the Grow Phase is an exciting time for your business. By focusing on expanding your customer base, introducing new products, and building a solid team, you'll be well on your way to achieving long-term success.

The Business Lifecycle Matrix: Exit Phase

If you decide to sell your business, you must find a buyer willing to pay a fair price. This can be a lengthy process, so patience is essential. It would be best to consider hiring a broker to help you find a buyer and negotiate a deal.

No matter which exit strategy you choose, a plan is essential. This will help you stay on track and exit your business smoothly and efficiently.

The Business Lifecycle Matrix: Implementation and Challenges

Now that you understand the Business Lifecycle Matrix and its four stages, it's time to dive into the implementation process. Implementing the matrix can be challenging, but it is essential for the long-term success of your business.

Marketing, advertising, and brand awareness are crucial during the growth stage. You must ensure your target audience knows about your products and what differentiates them from the competition. This is also an excellent time to establish your brand identity and build a loyal customer base.

The Business Lifecycle Matrix: The Role of Funding and Capital

As you navigate the Business Lifecycle Matrix, funding and capital are the most important factors to consider. This is especially true during the Build and Grow stages, where you must invest in your business to take it to the next level.

Another option is venture capital. This involves seeking out investors willing to invest in your business in exchange for a share of ownership. Venture capitalists often invest in high-growth companies with the potential for significant returns.

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Future of Business Lifecycle Matrix

Another potential future for the Business Lifecycle Matrix is a shift away from routine. With the rise of automation and artificial intelligence, routine tasks may become increasingly automated, allowing businesses to focus on more strategic decision-making. This may require a new approach to the Business Lifecycle Matrix that considers the changing role of routine tasks.

Business Lifecycle Matrix Frequently Asked Questions

What are some examples of harvesting strategies in business.

Harvesting strategies in business refer to ways of extracting value from a business, such as selling assets, reducing investments, or liquidating the business. One example of a harvesting strategy is focusing on short-term profits by cutting costs and reducing investments in long-term growth. Another example is selling off parts of the business that are no longer profitable or do not fit the company's long-term strategy.

What is the build, hold, harvest, and divest strategy?

What are some methods of harvesting a business, what does it mean to exit a business, and how does it fit into the business lifecycle.

Exiting a business refers to selling or liquidating it. It is a critical step in the business lifecycle, as it allows business owners to realize the value of their investment and move on to new opportunities. Exiting a business can be a voluntary decision, such as when the owner decides to retire or pursue other interests, or it can be forced, such as when the business is no longer profitable or sustainable.

What is the BCG Matrix, and how does it relate to the Business Lifecycle Matrix?

Business lifecycle matrix key takeaways, business lifecycle matrix: free powerpoint template, multi-chapter growth strategy framework (free template), lidl swot analysis: free ppt template and in-depth insights.

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Open Access is an initiative that aims to make scientific research freely available to all. To date our community has made over 100 million downloads. It’s based on principles of collaboration, unobstructed discovery, and, most importantly, scientific progression. As PhD students, we found it difficult to access the research we needed, so we decided to create a new Open Access publisher that levels the playing field for scientists across the world. How? By making research easy to access, and puts the academic needs of the researchers before the business interests of publishers.

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Home > Books > Entrepreneurship - Contemporary Issues

Business Harvesting Strategies for Entrepreneurs

Submitted: 01 June 2020 Reviewed: 21 July 2020 Published: 28 October 2020

DOI: 10.5772/intechopen.93442

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Entrepreneurship plays a pivotal role in our societies, such as employment creation. This is a key to addressing income inequalities leading to poverty reduction and economic growth. As a result of this critical role, the campaign is on establishing more entrepreneurial entities, and there is very little concern regarding harvesting an entrepreneurial entity. Entity harvesting is equally important as setting up a new entrepreneurial venture and this chapter explores this issue. During the harvesting process, the entrepreneur recovers value through the sale of an entrepreneurial entity or its assets. Having spent several years building and adding value to the business, the entrepreneur must design an entity harvesting strategy that would provide maximum returns on the investment of time, effort and money. Several reasons may compel the entrepreneur to harvest the business and this chapter provides some of these reasons based on extant literature and primary data collected from small- and medium-sized entity (SME) owners in Sub-Saharan Africa. Further, the chapter outlines various entity harvesting strategies preferred by SME owners in Sub-Saharan Africa and circumstances at which they deem appropriate to apply such.

• entrepreneur
• outright sale

Author Information

Herring shava *.

• Department of Business Management, Faculty of Management and Commerce, University of Fort Hare, Alice, South Africa

*Address all correspondence to: [email protected]

1. Introduction

The start-up process of a new entrepreneurial venture and until such time the entrepreneur decides to exit the business is a contentious issue. On the one hand, the entrepreneur is found working on a business plan intending to start an entrepreneurial venture. On the other hand, the entrepreneur is also found crafting a long-term business harvesting strategy. As contradicting as this may sound, this gives the entrepreneur a clear entrepreneurship roadmap which in many circumstances will be adjusted as the business owner responds to macro- and micro-environmental changes. Having a harvesting strategy upfront is critical for guiding the entity owner towards achieving the business mission. A business harvesting strategy could be characterised as the path to the finishing point at which the entrepreneur is expected to celebrate the sacrifices made, that is, effort, time and money. It is at that finishing point where the entrepreneur recovers the value-added into the business by selling either the firm in its entirety or partly in the form of assets. When this is done, the entrepreneur can start a new entrepreneurial venture or retire completely from the entrepreneurship career.

The significant contribution of entrepreneurship in our societies cannot be underestimated, especially on employment creation [ 1 ]. This is a key to addressing income inequalities leading to poverty reduction and economic growth [ 2 ]. As a result of this critical role, the campaign is mainly on establishing more entrepreneurial entities, and there is very little concern about harvesting an entrepreneurial entity [ 3 ]. There is very little empirical evidence on this subject from an African perspective [ 4 ]. However, it is important to note that entity harvesting is equally important as setting up a new entrepreneurial venture [ 5 ]. Resultantly, this chapter contributes to this gap in the literature by exploring this subject matter relying on primary data from SMEs in Sub-Saharan countries (Botswana, Eswatini, South Africa and Zimbabwe). The goal of this chapter is to explore the preferred entity harvesting options of SME owners in Sub-Saharan Africa and to determine why they prefer such options.

The next section will define business harvesting, followed by reasons for harvesting and a discussion on harvesting strategies available to entrepreneurs. The methodology used to gather primary data is explained, and a discussion of the findings is made. The chapter further outlines the implications of investigating small- and medium-sized entities (SME) harvesting practices, areas for further research.

2. Business harvesting

After entity start-up, the entrepreneur invests time, effort and money with the intent of growing the business. The entrepreneur invests time, effort and money to make money from the firm in the future. Through such entrepreneurial efforts, the entity accumulates value and ends up attracting competition. In such instances, the business could be vulnerable to hostile takeovers, and harvesting the business provides the entrepreneur with maximum returns on the investment made. By definition, business harvesting is a systematic practice by which the entrepreneur recovers value gained by the entity through the selling of individual assets or the entire firm as a whole. Various reasons compel the entrepreneur to harvest the entity and the section to follow outlines some of them.

2.1 Reasons for harvesting

Factors beyond the control of the owner or entity management could influence the mentioned entity players to consider harvesting [ 6 ]. Macro-environmental factors such as the global pandemic similar to Covid-19 have seen most entrepreneurs harvesting their entities as most entities could not operate under the global lockdown, which has extended for at least 3 months in some countries. Owing to the global lockdown, supply chain networks have been severely affected. Firms that rely on imported raw materials have suffered the most as movement of non-essential goods are currently suspended globally. Some factors leading to business harvest include the untimely death of the entrepreneur, serious ill health, or poor mental health. Unrest in the labour market or loss of key expertise may force the entrepreneur to harvest the business. Generally, harvesting reasons are unique to each entrepreneurial entity [ 5 ].

Micro-environmental factors speak to reasons for harvesting the entity which the entrepreneur has significant control over. The first example relates to the goal of the entrepreneur [ 7 ]. Some entrepreneurs start an entity and work hard to grow the firm so that it becomes very attractive to competition and later sell the entity for a substantial profit. The second example for wanting to harvest the entity could be that the entrepreneur falls in the category of serial entrepreneurs [ 8 ]. These are individuals who start entrepreneurial entities but after running the entity for a given period, they develop other lucrative business ideas and sell the existing firm to raise the needed capital for the new entrepreneurial venture.

Succession is another micro-environmental reason for harvesting the existing entity and it is common in family business [ 7 ]. Under succession, the family business owner steps down and pass entity ownership to the next family member. When the family business is carefully run, through succession, the firm will pass from generation to generation and this may continue over many decades. Further, the entrepreneur may start a new entity hoping that this would afford him free space and more time to himself but only to find out later that business demands are far much greater than envisaged. Traditionally, the entrepreneur still has to balance both home and business demands. Unfortunately, the inability to find a middle point between these competing issues may drive the entrepreneur to the point of harvesting the business. However, not all entrepreneurs fail to balance home and business demands. Some entrepreneurs are good at what they do such that the entrepreneurial entity they have built can outlive their physical and mental strength. When this happens, entrepreneurs often choose retirement as they no longer have the physical and mental strength to keep up with both business and home demands. Resultantly, they recover the value added in the business in the form of cash which in this case could be equated to a retirement package.

Choosing between available business harvesting options may not be that easy for the entrepreneur. Each harvesting option has its advantages and disadvantages. Therefore, the entrepreneur must diligently make the difficult decision to pick the one that would yield maximum returns in line with sacrifices made in building the entity. The next section looks at harvesting strategies that an entrepreneur can exercise.

2.2 Business harvesting options

Several harvesting options exist and these range from buyouts, mergers, outright sale, employee share ownership scheme and an initial public offering. The paragraphs to follow elaborate on the mentioned harvesting strategies.

2.2.1 Buyouts

Leveraged buyout (LBO). LBO happens when a large portion of a publicly quoted entity is sold to a private equity firm. During the sale process, the private equity firm gains a larger number of shares.

Management buyout (MBO). In an MBO scenario, the current management of the entity raises funds to buy out the entity owner. In instances where the firm decides to divest in a subsidiary, the current management takes control of a significant amount of equity. As much as the management remains in control of the larger share of the voting equity, to ensure continued smooth flow of operations, that is, firm relations with customers, creditors and suppliers, the previous owner may retain ownership of an equity stake in the firm. This practice is common in family-owned businesses where a small number of managers take control of a portion of equity.

MBO can be extended to other managers or employees and at that point, it then becomes a management employee buyout (MEBO). In many instances, employees are factored in the equation because of the key expertise they possess. This is common where branches of the entity are geographically dispersed, and it becomes an issue of common sense to involve the branch manager in the MEBO to facilitate easy management control. From a business perspective, the success of the branch becomes of interest to the manager owing to stake ownership. MBO or MEBO is advantageous to the owner as it offers a quick exit. The big disadvantage is that the management may not possess similar entrepreneurial traits to those of the departing owner, leading to the downfall of the newly established business.

A management buy-in (MBI). External managers are granted the opportunity to buy equity in the firm. Often the challenge here is that the newcomers have no extensive knowledge of the existing business particularly regarding how it operates. In rare cases, newcomers may be from the same sector as the existing business and therefore come with valuable insights concerning technology, knowledge on the competition, and how to grow the business leading to its success.

A more advantageous scenario is a hybrid buy-in/management buyout (BIMBO), and this is where a portion if inside managers and a portion of outsiders both acquire a stake in the firm. This is advantageous in the sense that existing managers have profound knowledge on the operations of the firm, meaning there will be little disruptions. More importantly, the incoming managers bring valuable operational insights towards growing the existing business which may have been missing all along.

Investor-led buyout (ILBO). The entire entity or part thereof is purchased by a privately owned equity firm. Depending on the circumstances or the state of the acquired firm, new management can be brought to run the affairs of the newly acquired entity. This is normally done to safeguard the investments made, especially when the acquired firm is in a precarious position. Conversely, when the newly acquired firm’s affairs are in order, existing management is likely to be retained, or a mix of new management and existing management may be the one responsible for the acquired firm. Unfortunately, in an ILBO, existing managers occupying specific office positions in the firm are normally not given the option to purchase stocks.

Leveraged build-up (LBU). When the goal of a private equity firm is to generate profits from a buyout or buy-in investment, they practice leveraged build-up. This is where the newly acquired entity, as a result of buyout or buy-in, is used as an investment platform, where a series of acquisitions are continuously added to it, forming a large corporate group. This move brings with it the ability to lure skilled and experienced managers, who can exponentially grow the entity through further acquisitions.

2.2.2 Business mergers

Merging a business is a process where the smaller entity is absorbed, often by a larger entity mostly to provide an extra muscle on the weaknesses of the small entity and to maximise on its strengths. The outcome of a merger is a large and very competitive entity. The entrepreneur who intends to harvest the entity through merging with another firm focuses more on the price, structure and terms of the proposed deal. Where mergers occur, special attention is also given to issues about organisational culture, the coming together of different personnel into a single entity, and the coming together of different products under one firm. Other issues that need to be addressed are the fears of employees regarding downsizing or retrenchment that may be necessary to ensure the viability and success of the new entity. More important, operational and marketing issues need further attention considering that products and services may have become so diverse as a result of the merger. Management has to decide as to which products and services they will discontinue or continue offering based on each product/service’s cash inflow strength. Research and development initiatives and manufacturing methods are some of the issues that will require special attention. More importantly, the entity has to decide with regards to supply chain partners they would want to continue to be in business with. When supply chain partners have been decided, that also influences the distribution channels they will adopt to ensure a hustle-free logistics management process.

2.2.3 Outright sale

The entrepreneur who opts for an outright sale of his firm as the harvesting option sells the entire business to any person who is willing to pay for the asking price. The buyer could be a supplier interested in forward integration, or the customer who is interested in backward integration. Sometimes the buyer is completely a neutral player from another sector whose intentions are to spread and diversify the risk. Often, entrepreneurs shy away from selling the business to the competitor as this entails disclosing or providing access to trade secrets, which could backfire if the deal fails to materialise.

2.2.4 Employee share ownership scheme (ESOS)

Various governments, particularly in developing countries, have been advocating for employee share ownership schemes as a means of maximising productivity and also as a means of fighting the inequality gaps as far as wealth distribution is concerned. In Africa, it is no secret that the majority of the wealth is controlled by a minority who are predominantly white. From the Africans’ point of view, this is gross injustice as they feel they are not benefiting from what is rightfully theirs (riches of Africa). To address this challenge, most African countries have crafted and legalised the employee share ownership scheme [ 9 ]. By definition, the employee share ownership scheme is a legalised route by which the employer can transfer some or all of the shares to employees who in turn assume ownership of the shares received [ 10 ]. By the end of the deal, employees develop a vested interest in the entity’s well-being and become motivated to participate strongly in the growth of the entity to realise as much wealth as they can. Through the ESOS, the entrepreneur harvesting the entity receives cash at different intervals on his way out. The advantage is that the management continues to run the entity at the same time benefiting from the scheme. The disadvantage is that this could also result in the loss of the entrepreneurial drive in the entity. Often, the ESOS is best suited for large corporations given the complications surrounding the structuring and mapping of the finances involved.

2.2.5 Initial public offering (IPO)

The entrepreneur who chooses initial public offering as a harvesting option enlist the entity on a public stock exchange and have its shares publicly traded [ 11 ]. As attractive as this is, the downside is that the entrepreneur now must account to several shareholders on issues related to entity growth and many other key issues shareholders may be interested in [ 12 ]. In other words, this could add more administrative issues to the entrepreneur that he/she may have not anticipated before choosing this harvesting option.

3. Methodology

This research is exploratory and predominantly quantitative. However, open-ended questions were incorporated to solicit further insights concerning the subject in question. A self-administered questionnaire was designed from extant literature on the subject of entity harvesting. Qualitative data gathered from open-ended questions provided rich insights as to the SME owner’s preferred method of harvesting and motivations to harvest the business. A sample of 612 SMEs was approached in Botswana, Eswatini, South Africa and Zimbabwe (Sub-Saharan Africa). Opportunistic convenience sampling was carried out. In the absence of a trusted sampling frame, field workers approached SME owners who were willing to participate in this research. Field workers explained the goal of the research and participants’ rights with regards to research that is the right to terminate participation without questions asked, right not to answer questions that infringe on their privacy, anonymity and truthful presentation of their views. Having explained at length issues related to the rights of the participants, their consent was sought and obtained. Descriptive statistics were performed to make the meaning of quantitative data. Similarly, qualitative data obtained were grouped into themes and each theme was observed and monitored in terms of recurrence. Thus, the frequency distribution of each theme was established to determine how popular that theme was among SME owners.

4. Findings

The results presented in this section provide a detailed background of the business owner and the SME. These cover issues related to the age of the business, location of the business, industry or sector in which the business is operating, the ownership structure of the business, the business development stage and sales revenue growth. Further, this section presents findings concerning harvesting practices preferred by small businesses in Sub-Saharan Africa.

4.1 Demographic distribution of SMEs

Data on the year of business establishment for the SMEs were gathered. The findings revealed that 40% of SMEs were between 5 and 10 years old whilst the other 40% were between 10 and 20 years old and 20% of the SMEs were established more than 20 years ago. Therefore, all the SMEs were in business for a considerable amount of time. This implies that the SME owners in question are fairly experienced business players. The findings with regards to the location of the SMEs reveal that that 20% of the SMEs were based in Gaberone, Botswana, 25% of the SMEs were based in Harare, Zimbabwe, 40% were based in Johannesburg, South Africa, and 15% of the SMEs were located in Mbabane, Eswatini. Data with regards to sector distribution of the SMEs revealed that 40% were in manufacturing, while mining, tourism, transport and logistics and retail sector were each represented by 15%, respectively. Data further revealed that 60% of the SMEs were registered as private companies, while partnerships and sole traders were both represented by 20%, respectively. The chapter further reveals that all SME owners who participated in this research are multiple business owners with 60% having total control and ownership of three operational SMEs, while 20% owned four operational SMEs and a further 20% being owners of two operational SMEs.

SME owners were further asked to identify the stage at which they thought their businesses occupied in the business life cycle (the SME at which they were found during fieldwork, that is, ignoring other SMEs they owned). The findings reveal that SMEs were at varying stages of the business life cycle with 20% being at the growth stage, while 40% were at the maturity stage and a further 40% already at their decline stage. A country analysis showing sales revenue growth in the past 12 months shows that SMEs in Botswana realised a more satisfactory movement (44%) followed by SMEs in Eswatini (42%) and SMEs in South Africa represented by 40%. Only 12% of SMEs in Zimbabwe registered satisfactory movement in sales revenue. This could be a reflector of the ongoing economic crisis that has affected the Zimbabwean economy for over a decade. As shown in Table 1 , Zimbabwean SMEs further leads on the declining sales revenue option as 34% of SMEs registered a decline in sales revenue and 54% registering non-satisfactory movement in sales revenue in the past 12 months.

SMEs sales revenue growth by country.

4.2 SMEs preferred harvesting options

SMEs were given a list of entity harvesting options and were asked to rank in order of preference to identify the harvesting option they would consider when the time of harvest has come. Findings are summarised in Table 2 . They reveal that the majority of SMEs in Sub-Saharan Africa preferred the outright sale harvesting option, M = 4.6, SD = 0.89, followed by the management buy-in harvesting option, M = 4.4, SD = 0.89, mergers, M = 3.8, SD = 1.3, investor-led buyout, M = 3.6, SD = 1.67 and leveraged build-ups with M = 3.4, SD = 1.51 concluded the top five preferred SMEs entity harvesting options.

4.2.1 Justification for choosing the outright sale entity harvesting option

SME owners who identified outright sale as their preferred entity harvesting method cited unavailability of an heir to take over the business, desire to pursue other interest, business reaching its peak performance level, retirement reasons, uncertain business environment and unavailability of a working turnaround business strategy as factors that would drive them to consider an outright sale of the entity. Table 3 provides descriptive statistics summarising the observed frequencies of the mentioned reasons.

SMEs preferred entity harvesting options in Sub-Saharan Africa.

Reasons behind choosing the outright sale harvesting option.

Absence of an heir. In the absence of an immediate family member to take over the business, SME owners pointed out that it is rather wise for them to cash in on their businesses and enjoy the fruits thereof than to leave the business to a distant relative who never contributed towards the well-being of the entity.

Business performance is at peak. Other SME owners pointed out that they would consider an outright sale harvesting option when the entrepreneurial entity has reached its all high-performance mark. This move is advantageous considering that this is the point where the business will be very attractive to competition and other individuals or organisation interested in a takeover. Given this situation, the entrepreneur has more bargaining power and is more likely to receive a significant amount better than the firm’s asking price.

Desire to pursue other interests. The desire to pursue other interests in this research was found to be triggered by the failure of the current enterprise to bring forth the anticipated results. Although some SME owners are genuinely interested in pursuing other business avenues, SME owners pointed out that they would rather cash in on the business especially once signs and symptoms of decline are noticed. They argued that rarely does it pay to continue investing time, effort and money once the business has started showing negative signs of performance.

Conversely, not all SMEs were of the view that they would harvest the entity through outright sale when it is poorly performing. The findings also revealed that most entrepreneurs preferred harvesting their ventures on discovering new and exciting opportunities, which they viewed as more profitable than the existing one. In support, some respondents also argued that where an entrepreneur comes up with a more lucrative business plan that has been well evaluated, the less lucrative venture must be harvested to mobilise funds to finance the lucrative business opportunity. Some SME owners were also quick to emphasise that the culture among SME owners was such that as long as the venture is still viable, there is no reason for harvesting the entity.

Retirement plan. A few SME owners pointed out they would consider the outright sale as their harvesting strategy and completely retire from the entrepreneurial life. The outright sale harvesting option would provide them with enough funds to sustain them when they are no longer actively involved in business markets.

Uncertain business environment. A significant number of SMEs particularly those found in the mining sector pointed out that for them, their businesses are largely affected by ever-changing government policies around mineral ownership and the processes involved in the selling of the minerals. The SMEs in the mining sector felt that they are the least protected by regulations. Mining operations are severely threatened by artisanal miners who continuously invade mining shafts and plants. In all this chaos, SME owners blame governments for doing very little to protect SMEs in the mining sector and their employees. When the rule of law is compromised as is the case in the mining sector, an outright sale was the preferred harvesting strategy. This enables the entrepreneur to invest capital in countries where the rule of law is known to be uncompromised.

Failure of the business turnaround strategy. Unlike some other SMEs who would harvest once symptoms and signs of failure start being noticed, some prefer to try and resuscitate the firm. However, when these efforts fail, they then choose to practice the outright sale harvesting option. The disadvantage of this strategy is that the business may have hit rock bottom a long time ago without the owner noticing. As such, when the new buyer comes, he or she has more bargaining power and the entrepreneur may receive proceeds that are far below the market value of the entity.

4.3 Business merger

The findings reveal that entity merger was the third preferred harvesting option, M = 3.8, SD = 1.30. A study conducted in India by Mantravadi and Reddy [ 13 ] found out that firm profitability levels behaved differently depending on the sector after the merger, with some having their profitability levels increasing yet others experienced a decline. Generally, mergers are known to result in improved profitability for firms that were experiencing a sharp decline in profits. It was therefore very much anticipated for SME owners in Sub-Saharan Africa to at least consider business merger as a harvesting method given its tremendous benefits which include, improved revenues and profitability, faster growth in scale and quicker access to markets, acquisition of new technology, elimination of competition and increased market share [ 4 ]. Also, through mergers, firms enjoy tax shields and investment savings.

Lack of operating and growth capital. SME owners pointed out that if the firm is experiencing liquidity challenges, merging with a financially stable firm is the only route to preserving the legacy of the founder and keep initial business ideas, products, or services for a reasonable time in the market. Some of the SME owners pointed out that they had undertaken this harvesting practice before. For the previous mergers to occur, SME owners pointed out that the underlying reason that led to those mergers was liquidity problems. However, family and friends played an influential role in choosing the harvesting option. Other SME owners pointed out that they consider a business merger as it is a welcome opportunity to come out of financial distress without having to approach banks for funding.

The research sought the respondents’ views on different types of buyouts they would consider as their harvesting options. The findings imply that buyout options are widely used by SMEs. Buyouts involve a transition from one set of owners to another where the previous owners lose control over the firm and the new ones pay a premium for shares that gives them a controlling interest in the firm. The results on the different types of buyouts as entity harvesting options preferred by SMEs owners show that management buy-in is the second most preferred entity harvesting option, M = 4.4, SD = 0.89.

The findings reveal that SME owners are willing to surrender their businesses to external management for considerable value than their internal ones. Investor-led buyout (ILBO) was identified as the fourth preferred entity harvesting option, M = 3.6, SD = 1.67. SME owners argued that if the business is taken over by some investor institutions and is rejuvenated, their peers judge them better than if the same happens with former employees. Leveraged build-ups (LBUs) were identified by SME owners as the fifth preferred entity harvesting option, M = 3.4, SD = 1.51, whereas management buyout (MBO) was the sixth preferred entity harvesting option, M = 3, SD = 1.41.

4.4.1 SME justification for preferring various buyout options

No suitable family member to take over the firm. Similar to the outright sale harvesting option, the MBI, ILBO, LBU and MBO entity harvesting options were identified as harvesting options by SME owners citing unavailability of a suitable family member to drive the firm forward when they quit. SME owners experienced displeasure in the idea that a distant relative would inherit the estate in case their close relatives are not business focused. Hence, SME owners preferred to settle for either the MBI, ILBO, LBU or MBO entity harvesting options.

De-risking. Some SME owners singled out the LBO entity harvesting option. They cited de-risking as their motivation for preferring this strategy. SMEs owners pointed out that the ILBO by design brings in the much-needed capital to fund business growth initiatives, in the process guaranteeing business continuity. In other words, a portion of SME owners is not interested in total entity harvesting but partial harvest.

Poor health. Some SME owners opted for the ILBO harvesting option citing deteriorating health conditions. In this case, the owner sells a division of a firm instead of the entire firm. Health failure means that the SME owner is no longer able to participate in business affairs daily. In certain instances, the entrepreneur remains hopeful that he or she would recover and be actively involved in the affairs of the entity and possibly buy out the investor. For the hopeful entrepreneur, it is better to have somebody taking care of the firm until the entrepreneur’s recovery point, and by design, the ILBO from the SME owner’s perspective, it provides this opportunity.

4.5 Employee share ownership scheme (ESOS)

The research findings reveal that the ESOS is the least preferred entity harvesting options among SME owners, M = 2.8, SD = 1.30. SME owners who preferred this option pointed out that because they would have succeeded in building a strong performance-oriented culture, it was more strategically important for them to involve entity employees in the entity’s succession plans. From the SME owner’s perspective, having employees who are best performers to own a stake in the firm and participate in running the affairs of the entity would make it easier to pass on the performance-oriented culture to all incoming employees. This is critical in ensuring that the firm’s competitive advantage is sustained and the firm’s profitability abilities maintained for a foreseeable future.

5. Discussion of the findings

The findings presented in this chapter indicate that both macro- and micro-environmental factors play a significant role concerning the SME owner’s preferred entity harvesting strategy. The majority of SME owners in Sub-Saharan Africa pointed out that they prefer an outright sale as an entity harvesting strategy. The results show that this decision is largely influenced by the absence of an heir (macro-environmental factor). SME owners have little control over this aspect and as much as business skills can be learned, people’s interest differs upon realising and accepting this reality, SME owners are left with the option of disposing of the entity and salvage the value they may have added to the firm.

The results further reveal that among buyout options, the ILBO is more popular with SME owners as it was more preferred compared to all other buyout options. The findings further reveal that SME owners are worried about the volatility, uncertainty, chaos and unpredictability of the business environment. From the findings, the majority of SMEs are either declining or static and very few are making significant profits as most economies are in a recession. The present circumstances do not help SME owners in Zimbabwe who have consistently braved the economic downturn for over a decade and with the global economy in recession owing to the Covid-19 pandemic, this situation will drastically affect preferred entity harvesting options, possibly from an outright sale to mergers including some of the buyout options.

Despite the global recession that is very likely to have a bearing on preferred entity harvesting options, SME owners are somewhat hopeful that their businesses can have a second life. This is why apart from an outright sale, they believe that through MBI and mergers, their entities or entity offerings are still relevant to the market. What also can be learned from the findings is that such decisions are not being made only in light of the bad economic situation but it appears they were made right from the start as part of the business plan and continue to be adjusted as the economic situation changes.

However, from findings, it has been observed that SMEs owners appear not ready to give current employees and management a chance to own shares and to run the business as a harvesting option. In contrast to extant literature which pointed out that the ESOS is meant to spread the wealth between entity employees and entity owners, the findings reveal that entity owners are utilising this strategy to secure entity profitability for a longer period by extending share ownership to best-performing employees who in turn will have the obligation to pass on the performance-oriented culture to newly recruited employees.

6. Implications for studying entity harvesting strategies

6.1 theoretical implications.

The chapter explained SME owner preferred entity harvesting strategies making use of primary data collected from four Southern African countries and to the author’s best knowledge, by the time of writing, this research is the first to adopt such a strategy. More importantly, this chapter calls for more research to be done in this area and advance the debate on SME owner business exit strategies as they are critical in guiding the owner in achieving the entity’s mission. Also, the findings presented in this chapter contribute significantly to the gap in extant literature in the Sub-Saharan Africa region and beyond.

6.2 Practical implications

The findings presented in this chapter point to the notion that the preferred SME owner entity harvesting strategies are largely reactionary. This means that SME owners respond to macro- and micro-environmental factors and by so doing they are more of spectators rather than influencers of the business environment. The only way SMEs can succeed in practicing their original entity harvesting plan without being reactionary is to work diligently and make sure that micro-environmental factors are aligned to their needs. As a result, business consultants, policymakers and business support institutions can help SMEs in training their employees to be the best performers and ensure that all employees with funds can participate in ESOS. Currently, the practice is that only best performing employees benefit from this initiative defeating the original purpose which it was designed for. Other training activities can be held to help SMEs with risk management skills which would help when the de-risking time comes. SME owner-preferred entity harvesting options are influenced by the unavailability of an heir to take over the reins of the entity. This affects mostly family-owned SMEs. It should be acknowledged that succession is not a short-term endeavour but a long-term issue. Therefore, the search and training for a potential successor should start early to ensure the continuity of the firm. The critical aspect of the succession plan is raising awareness among the current SME owner/managers to kick start the search and preparation for succession early. This will enable them to identify the needed support tools, measures and the relevant infrastructure to enhance the success chances of the incoming an heir. When this is done on time, the thinking is that succession plans would have less effect on the SME owner’s preferred entity harvesting strategy.

7. Limitations of the study

The research is exploratory and descriptive. Although this is a stepping stone in trying to answer complex questions around SME owner-preferred entity harvesting strategies, considering that this was a cross-country analysis, issues related to culture and economic outlook were not controlled to determine if they had a major bearing on entity harvesting strategies reported. The reader should, therefore, exercise caution in the interpretation and application of the findings.

8. Future research

Future research should focus on similar harvesting strategies to establish causal relationships and also identifying boundaries in which the SME owner’s choice of entity harvesting strategy is directly or indirectly influenced by country characteristics, age of the business and economic outlook. Given that this was an exploratory research, the author further advocates for more studies making use of both simple and complex multivariate statistical analysis to establish definite relationships on this phenomenon.

9. Conclusion

The chapter outlined SME owner-preferred entity harvesting strategies and determined why the given option is preferred. Relying on cross-country data, the chapter concludes that the majority of SME owners prefer the outright sale option when harvesting their entities. This option is mainly influenced by the absence of an heir to take over the reins of the business implying that most SMEs are family-owned businesses. The chapter also concludes that SMEs do prefer other entity harvesting strategies such as mergers and buyout which includes among them ILBO, MBI, LBU and MBO as well as employee share ownership schemes. Mergers and buyout options are largely influenced by deteriorating economic conditions among other factors. The chapter further concludes that SMEs also prefer ESOS as a harvesting strategy but solely to secure the entity’s competitive advantage and profitability for as long as they can. This is evident in their willingness to sell entity stake to best performing employees who in turn have the duty to pass on the performance-oriented culture to recruits. However, among all other harvesting strategies that SMEs do prefer, the IPO was not one of them. The reason could be that SMEs are still battling with issues related to entity control and autonomy.

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Business Harvesting: Understanding This Step in the Entrepreneurial Process

Business and the entrepreneurship process include many different phases and stages. Each stage presents opportunities and challenges. One stage that nearly every entrepreneur looks forward to is the stage when they can enjoy the financial benefits of their efforts. This stage is known as harvesting. Let’s take a look at what harvesting is and the different types of harvesting strategies.

What is Harvesting and Why is it Important?

It typically involves the entrepreneur realizing the value of their business. The primary aim of harvesting is to convert the business’s growth and success into tangible financial gains, providing a return on investment for the business owner and any investors.

This phase of entrepreneurship is crucial for motivating entrepreneurs. Many set this phase as a goal and a rewarding endpoint for their venture.

Types of Harvesting

1. selling the business.

For many entrepreneurs, selling their business is an often emotional life event. Many founders think of their businesses as the product of their passions and skills. Some entrepreneurs can experience joy and relief after a sale. Others may experience a feeling of fear, regret, or loss. Although parting with a business is often part of the entrepreneurial process, many entrepreneurs struggle with the decision to enter this stage.

2. Initial Public Offering (IPO)

For one, it can provide substantial capital to the company. Businesses also get an increase in their public profile as now people who use the product or service can buy shares to add to their investment portfolio. Even though an IPO allows the public to own shares in a previously privately held company, this harvesting method still allows original investors and founders to retain partial ownership and control.

3. Mergers and Acquisitions (M&A)

Mergers and acquisitions involve combining with or being bought by another company. This method can be advantageous for entrepreneurs looking to expand their business’s reach, diversify their portfolio, or access new markets and technologies. In a merger, two companies typically agree to go forward as a single new entity.

4. Management Buyouts (MBO)

MBOs are typically financed through a combination of personal savings, loans, and sometimes external funding. This approach is beneficial for entrepreneurs who wish to see their business legacy preserved. It also motivates the management team to perform well, given their vested interest in the company’s success.

5. Dividends and Profit Sharing

Dividends provide a regular income stream to the shareholders, which can be particularly appealing for businesses with steady profits.

Recognizing Opportunity as an Entrepreneur

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How to Write a Great Business Plan

• William A. Sahlman

Every seasoned investor knows that detailed financial projections for a new company are an act of imagination. Nevertheless, most business plans pour far too much ink on the numbers–and far too little on the information that really matters. Why? William Sahlman suggests that a great business plan is one that focuses on a series of questions. These questions relate to the four factors critical to the success of every new venture: the people, the opportunity, the context, and the possibilities for both risk and reward. The questions about people revolve around three issues: What do they know? Whom do they know? and How well are they known? As for opportunity, the plan should focus on two questions: Is the market for the venture’s product or service large or rapidly growing (or preferably both)? and Is the industry structurally attractive? Then, in addition to demonstrating an understanding of the context in which their venture will operate, entrepreneurs should make clear how they will respond when that context inevitably changes. Finally, the plan should look unflinchingly at the risks the new venture faces, giving would-be backers a realistic idea of what magnitude of reward they can expect and when they can expect it. A great business plan is not easy to compose, Sahlman acknowledges, largely because most entrepreneurs are wild-eyed optimists. But one that asks the right questions is a powerful tool. A better deal, not to mention a better shot at success, awaits entrepreneurs who use it.

Which information belongs—and which doesn’t—may surprise you.

Few areas of business attract as much attention as new ventures, and few aspects of new-venture creation attract as much attention as the business plan. Countless books and articles in the popular press dissect the topic. A growing number of annual business-plan contests are springing up across the United States and, increasingly, in other countries. Both graduate and undergraduate schools devote entire courses to the subject. Indeed, judging by all the hoopla surrounding business plans, you would think that the only things standing between a would-be entrepreneur and spectacular success are glossy five-color charts, a bundle of meticulous-looking spreadsheets, and a decade of month-by-month financial projections.

• William A. Sahlman is the Dimitri V. D’Arbeloff-MBA Class of 1955 Professor of Business Administration at the Harvard Business School.

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Business Exit Strategy: Definition, Examples, Best Types

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

What Is a Business Exit Strategy?

A business exit strategy is an entrepreneur's strategic plan to sell his or her ownership in a company to investors or another company. An exit strategy gives a business owner a way to reduce or liquidate his stake in a business and, if the business is successful, make a substantial profit. If the business is not successful, an exit strategy (or "exit plan") enables the entrepreneur to limit losses. An exit strategy may also be used by an investor such as a venture capitalist in order to plan for a cash-out of an investment.

Business exit strategies should not be confused with trading exit strategies used in securities markets.

Key Takeaways

• A business exit strategy is a plan that a founder or owner of a business makes to sell their company, or share in a company, to other investors or other firms.
• Initial public offerings (IPOs), strategic acquisitions, and management buyouts are among the more common exit strategies an owner might pursue.
• If the business is making money, an exit strategy lets the owner of the business cut their stake or completely get out of the business while making a profit.
• If the business is struggling, implementing an exit strategy or "exit plan" can allow the entrepreneur to limit losses.

Understanding Business Exit Strategy

Ideally, an entrepreneur will develop an exit strategy in their initial business plan before actually going into business. The choice of exit plan can influence business development decisions. Common types of exit strategies include initial public offerings (IPO) , strategic acquisitions , and management buyouts (MBO) . Which exit strategy an entrepreneur chooses depends on many factors, such as how much control or involvement (if any) they want to retain in the business, whether they want the company to be run in the same way after their departure, or whether they're willing to see it shift, provided they are paid well to sign off.

A strategic acquisition, for example, will relieve the founder of his or her ownership responsibilities, but will also mean the founder is giving up control. IPOs are often seen as the holy grail of exit strategies since they often bring along the greatest prestige and highest payoff. On the other hand, bankruptcy is seen as the least desirable way to exit a business.

A key aspect of an exit strategy is business valuation , and there are specialists that can help business owners (and buyers) examine a company's financials to determine a fair value. There are also transition managers whose role is to assist sellers with their business exit strategies.

Business Exit Strategy and Liquidity

Different business exit strategies also offer business owners different levels of liquidity . Selling ownership through a strategic acquisition, for example, can offer the greatest amount of liquidity in the shortest time frame, depending on how the acquisition is structured. The appeal of a given exit strategy will depend on market conditions, as well; for example, an IPO may not be the best exit strategy during a recession, and a management buyout may not be attractive to a buyer when interest rates are high.

While an IPO will almost always be a lucrative prospect for company founders and seed investors, these shares can be extremely volatile and risky for ordinary investors who will be buying their shares from the early investors.

Business Exit Strategy: Which Is Best?

The best type of exit strategy also depends on business type and size. A partner in a medical office might benefit by selling to one of the other existing partners, while a sole proprietor’s ideal exit strategy might simply be to make as much money as possible, then close down the business. If the company has multiple founders, or if there are substantial shareholders in addition to the founders, these other parties’ interests must be factored into the choice of an exit strategy as well.

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Harvest strategy must be part of business plan

By deseret news , james c. brau, brigham young university.

Entrepreneurs typically launch ventures for one of two reasons. Either they want to be their own boss for the long haul and develop a "lifestyle" business, or they want to grow a business and then subsequently harvest it.

An example of a lifestyle business is a mechanic who runs his own repair shop and who plans to run it for 30 years, passing the business down to his children. Another example is an attorney who hangs his own shingle and plans to practice law for his career and then pass the firm down to his children.

The second type of business is the type you hear people talk about when they "give birth" to a venture with the hope of harvesting the value and becoming independently wealthy. Most of us know someone or know of someone who is now a millionaire because he or she successfully built a business and then harvested it.

In a 2003 Journal of Business study titled, "The Choice of IPO versus Takeover: Empirical Evidence," two co-authors and I studied what types of firms harvest through an initial public offering and what types of firms harvest through being acquired by another firm.

In an IPO, exiting founders and investors sell shares of the firm to the public. The proceeds that are raised from the IPO either go into the company's coffers (primary shares) or to the selling founders and investors (secondary shares). Thus, if an entrepreneur sells personal (secondary) shares in the IPO, he or she can harvest the proceeds from those shares as personal gain. Typically, founders issue mostly primary shares in the IPO and then must wait through a lockup period, typically 180 days, before being able to sell their personally owned shares. After the lockup, founders can harvest by selling their personal shares on the open market , subject to certain selling restrictions.

The alternate path we studied in our Journal of Business article is the choice to sell the company to another firm. The robust mergers and acquisition market is evidence that many entrepreneurs choose to sell out rather than attempt the IPO path.

In our study, we found six factors that are positively related to the probability that a firm conducts an IPO rather than being taken over: 1) degree of industry concentration, 2) current cost of debt, 3) hotness of the IPO market, 4) size of the firm, 5) insider ownership percentage, and 6) if the firm is in a high-technology industry.

Our tests indicated four factors associated with the likelihood of selling out rather than pursuing an IPO: 1) firms in high growth industries, 2) firms in financial service sectors, 3) firms in high-debt industries, and 4) deals that involve greater liquidity for selling insiders.

In addition to documenting the factors associated with IPO versus sell-out firms, we also discovered a liquidity discount between the IPO and takeover tracks. Insiders who chose to conduct an IPO earned 22 percent more of a premium on average when compared to insiders who sold out — 50 percent greater using medians instead of means. The difference between the premiums quickly widens depending on the method of payment for the takeover — cash versus stock — and the high-tech status of the firm. (For the complete paper, go to marriottschool.byu.edu/emp/brau/jimbrauvita.htm and select the link to the article.)

Whether you are an entrepreneur in a lifestyle firm or you are at the reins of a quick-growing new venture that you hope to hit the moon with, it is crucial that you think about the harvest strategy as an integral part of the business plan. For example, a dentist who runs his practice for 30 years will most likely need to sell the business when he or she is ready for retirement. In a similar manner, the entrepreneurial team who needs capital from a venture capitalist or angel investor needs to be prepared to explain the harvest strategy as part of the business plan pitch.

James C. Brau is affiliated with the BYU Center for Entrepreneurship. He can be reached via e-mail at [email protected].

Timber Harvesting Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business Plans » Agriculture Sector » Agro-Allied

Are you about starting a timber harvesting business? If YES, here is a complete sample timber harvesting business plan template & feasibility report you can use for FREE .

Okay, so we have considered all the requirements for starting a timber harvesting business. We also took it further by analyzing and drafting a sample timber harvesting marketing plan template backed up by actionable guerrilla marketing ideas for timber harvesting companies. So let’s proceed to the business planning section.

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If you are thinking of starting a business with good returns on investment, then one of your best bet is to venture into the logging industry and you just want to concentrate on timber harvesting and supply.

Just like all other investment vehicles, there are potential down sides that you need to look out for if you want to start a timber harvesting and supply business. One of the major risks in the timber harvesting and supply business is deforestation which may attract unfavorable government legislation.

Part of what you need to do to make headway in this line of business is to ensure that you have the required license and permits and you have good business relationship with construction contractors, constructions companies, furniture manufacturers, paper manufacturers and key players in relevant industries.

If you are truly convinced that starting a timber harvesting and supply business is the right business for you to do, then you need to write your own business plan. Below is a sample timber harvesting and supply business plan template that will help you successfully write yours with little or no stress.

A Sample Timber Harvesting Business Plan Template

1. industry overview.

Timber harvesting companies are involved in cutting, skidding, on-site processing, and loading of trees or logs onto trucks or skeleton cars. The trees are then transported as saw logs to cottage companies such as sawmills and pulp mills et al.

It is important to state that the logging industry that timber harvesting business is a part of does not include businesses that are involved in breeding, planting or growing trees. Companies that provide these services are classified under the Timber Services industry.

Timber harvesting is indeed a big business and should not be handled with levity; little wonder there is a university degree dedicated to forestry. So, it is important that you acquire relevant training and education before launching your own timber harvesting company.

Part of what you need to do is to enroll for a degree or diploma in forestry and upon graduation; you can apply and work with a logging company or the forestry ministry in your country.

The truth is that when you are properly educated, it makes it easier for you to follow best practices in conducting your business. As a matter of fact, there are laws regulating the logging industry and it is your responsibility to ensure that you abide by them.

If you are a close watcher of the logging industry, you will agree that over the past five years, the industry has been in recovery mode since construction activities have been climbing upward from recessionary low point, driving industry revenue.

The demand conditions for the industry are expected to continue improving going forward, as recovery in the residential construction market is forecast to strengthen as home improvement spending rises. On the other hand, paper manufacturing is forecast to slow due to the trend toward electronic communication, and of course reducing demand from key industrial players.

The logging industry that timber harvesting business is a subset of is indeed a large industry and pretty much active in a lot of countries.

Statistics has it that in the united states of America alone, there are about 49,828 registered and licensed logging companies scattered all across the United States responsible for employing about 93,353 and the industry rakes in a whooping sum of $16 billion annually.

The industry is projected to grow at 2.3 percent annual growth within 2011 and 2016. It is important to state that Weyerhaeuser has the lion market share of the available market in the industry.

A recent report published by IBISWORLD shows that the logging industry has medium barriers to entry, and this is due to the various regulations and policies that logging companies must comply with as well as the high level of competition within the industry.

The report further stated that industry regulations primarily focus on environmental factors that include: The Clean Air Act, the Clean Water Act, the Endangered Species Act and the Toxic Substances Control Act, which regulate the use of fire, chemicals and timber extraction in timber tracts.

The report also stated that despite the fact that there is a high level of regulation, the industry also benefits from government assistance provided by the US Forest Service, the Sustainable Forestry Implementation Committee and the National Resources Conservation Service, as well as some protectionist trade policies.

Some of the factors that encourage entrepreneurs to start their own timber harvesting company could be that the business is a profitable business. Even though the business is not a Green business, the truth is that the business will continue to remain relevant as long as logs and other products manufactured by loggers are still in use in our world.

It is important to state that the logging industry is highly regulated in the United States of America and anyone who aspires to start a timber harvesting company must apply and obtain a license before they can legally operate in the industry.

2. Executive Summary

Bradford Lugard™ Timber Harvesting & Processing, Inc. is a registered timber harvesting and processing business that will be located in Des Moines – Iowa. We have been able to secure all the needed state and federal licenses and permits that will enable us operate the business in Des Moines – Iowa.

Bradford Lugard™ Timber Harvesting & Processing, Inc. will be involved in cutting, skidding, on-site processing, and loading of trees or logs onto trucks or skeleton cars. We are set to service a wide range of clientele in and around Des Moines – Iowa.

We are aware that there are several timber harvesting companies all around Des Moines – Iowa, which is why we spent time and resources to conduct a thorough feasibility studies and market survey so as to be well positioned to favorably compete with all our competitors.

Bradford Lugard™ Timber Harvesting & Processing, Inc. will ensure that all our customers are given first class treatment whenever they contact us or patronize our services.

We have a CRM software that will enable us manage a one on one relationship with our customers no matter how large they may grow to. We will ensure that we get our customers involved in the selection of brands that will be on our store and also when making some business decisions.

Bradford Lugard™ Timber Harvesting & Processing, Inc. will at all times demonstrate her commitment to sustainability, both individually and as a firm, by actively participating in our communities and integrating sustainable business practices wherever possible.

We will ensure that we hold ourselves accountable to the highest standards by meeting our customers’ needs precisely and completely whenever they patronize our products.

Bradford Lugard™ Timber Harvesting & Processing, Inc. is a family business that is owned by Bradford Lugard and his immediate family members. Bradford Lugard has a B.Sc. in Forestry, with over 5 years’ experience in the logging industry, working for some of the leading brands in the United States.

3. Our Products and Services

Bradford Lugard™ Timber Harvesting & Processing, Inc. is in the logging industry to service a wide range of clients and of course to make profits, which is why we will ensure that we go all the way to service a wide range of clients in the United States.

We will do all that is permitted by the law of the United States to achieve our aim and ambition of starting the business. Our product offerings are listed below;

• Cutting, skidding, on-site processing, and selling/supply of logs

4. Our Mission and Vision Statement

• Our vision is to become the leading brand in the timber harvesting industry in Des Moines – Iowa and with license to operate all across the United States of America.
• Our mission is to establish a world – class timber harvesting and processing business that will work with clients all across the United States of America via supply of processed timber.

Our Business Structure

At Bradford Lugard™ Timber Harvesting & Processing, Inc., our business structure will be designed in such a way that it can accommodate both full-time and part-time staff.

We intend starting our timber harvesting and processing company with a handful of full time employees (professional loggers and truck drivers); and some of the available timber cutting and processing machine operators and truck driving roles fill be handled by qualified contract operators. Adequate packages have been prepared for all our full-time employees.

As a means of maximizing operational cost, we will contract the maintenance of all our timber cutting and processing machines and trucks to a service provider, we don’t intend to maintain a very large overhead from the onset. But as soon as the business grows and stabilizes, we will assemble our own professional in-house maintenance team.

Below is the business structure and the roles that will be available at Bradford Lugard™ Timber Harvesting & Processing, Inc.;

• Chief Operating Officer (Owner)

Admin and HR Manager

Transport and Logistics Manager

• Business Developer

Timber Harvesting and Processing Machine Operators

• Professional Truck Drivers
• Client Service Executive/Front Desk Officer

5. Job Roles and Responsibilities

Chief Executive Officer – CEO:

• Increases management’s effectiveness by recruiting, selecting, orienting, training, coaching, counseling, and disciplining managers; communicating values, strategies, and objectives; assigning accountabilities; planning, monitoring, and appraising job results; developing incentives; developing a climate for offering information and opinions
• Creates, communicates, and implements the organization’s vision, mission, and overall direction – i.e. leading the development and implementation of the overall organization’s strategy.
• Responsible for fixing prices and signing business deals
• Accountable for providing direction for the business
• Responsible for signing checks and documents on behalf of the company
• Evaluates the success of the organization
• Responsible for overseeing the smooth running of HR and administrative tasks for the organization
• Maintains office supplies by checking stocks; placing and expediting orders; evaluating new products.
• Ensures operation of equipment by completing preventive maintenance requirements; calling for repairs
• Defines job positions for recruitment and managing interviewing process
• Carries out induction for new team members
• Responsible for training, evaluation and assessment of employees
• Responsible for arranging travel, meetings and appointments
• Oversee the smooth running of the daily office activities.

Sales and Marketing Manager

• Manages external research and coordinate all the internal sources of information to retain the organizations’ best customers and attract new ones
• Identify, prioritize, and reach out to new partners, and business opportunities et al
• Responsible for supervising implementation, advocate for the customer’s needs, and communicate with clients
• Develops, executes and evaluates new plans for expanding sales
• Documents all customer contact and information
• Represents the company in strategic meetings
• Helps to increase sales and growth for the company
• Accountable for coordinating truck drivers, vehicles, loads and journeys
• In control of operating IT systems for the organization
• In charge of negotiating contracts for the organization
• Responsible for developing and confirming schedules
• Responsible for planning for and negotiating technical difficulties
• Responsible for implementing environmental and safety standards
• Handles the planning routes and load scheduling for multi-drop deliveries.
• Handles booking in deliveries and liaising with customers.
• In charge of allocating and recording resources and movements on the transport planning system.
• Responsible for ensuring all partners in the supply chain are working effectively and efficiently to ensure smooth operations.
• Responsible for communicating effectively with clients and responding to their requirements.
• In charge of directing all transportation activities.
• Responsible for developing transportation relationships.
• Responsible for monitoring transport costs.
• In charge of negotiating and bargaining transportation prices.
• Responsible for dealing with the effects of congestion.
• Responsible for confronting climate change issues by implementing transport strategies and monitoring an organization’s carbon footprint.
• Responsible for preparing financial reports, budgets, and financial statements for the organization
• Provides managers with financial analyses, development budgets, and accounting reports; analyzes financial feasibility for the most complex proposed projects; conducts market research to forecast trends and business conditions.
• Responsible for financial forecasting and risks analysis.
• Performs cash management, general ledger accounting, and financial reporting
• Responsible for developing and managing financial systems and policies
• Responsible for administering payrolls
• Ensures compliance with taxation legislation
• Handles all financial transactions for the company
• Serves as internal auditor for the company
• Responsible for cutting, skidding and on-site processing of logs
• Assist in loading and unloading timbers

Truck Drivers

• Responsible for transporting timbers
• Assists in loading and unloading timbers
• Maintains a logbook of their driving activities to ensure compliance with federal regulations governing the rest and work periods for operators.
• Keeps a record of vehicle inspections and make sure the truck is equipped with safety equipment, such as hazardous material placards.
• Inspects vehicles for mechanical items and safety issues and perform preventative maintenance
• Complies with truck driving rules and regulations (size, weight, route designations, parking, break periods etc.) as well as with company policies and procedures

Client Service Executive

• Welcomes/receive clients by greeting them in person or on the telephone; answering or directing inquiries.
• Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides the client with a personalized customer service experience of the highest level
• Through interaction with parents and students on the phone, uses every opportunity to build clients’ interest in the organizations’ products and services
• Consistently stays abreast of any new information on the organizations’ products, promotional campaigns etc. to ensure accurate and helpful information is supplied to clients when they make enquiries
• Receives parcels/documents for Bradford Lugard™ Timber Harvesting & Processing, Inc. and distribute mails in the organization
• Handles any other duties as assigned by HR and Admin Manager or Transport & Logistic Manager.

6. SWOT Analysis

Our intention of starting Bradford Lugard™ Timber Harvesting & Processing, Inc. in Des Moines – Iowa is to test run the business for a period of 2 to 4 years to know if we will invest more money and expand the business all around in the United States of America.

We are quite aware that there are several timber harvesting and processing companies scattered all over the United States of America and even in the same location where we intend starting ours, which is why we are following the due process of establishing a business.

We know that if a proper SWOT analysis is conducted for our business, we will be able to position our business to maximize our strength, leverage on the opportunities that will be available to us, mitigate our risks and be equipped to confront our threats.

Bradford Lugard™ Timber Harvesting & Processing, Inc. employed the services of an expert HR and Business Analyst with bias in startups to help us conduct a thorough SWOT analysis and to help us create a Business model that will help us achieve our business goals and objectives.

This is the summary of the SWOT analysis that was conducted for Bradford Lugard™ Timber Harvesting & Processing, Inc.;

Our core strength lies in the power of our team; our workforce. We have a team that can go all the way to give our clients value for their money; a team that are trained and equipped to pay attention to details and to deliver excellent jobs.

We are well positioned and we have standard and reliable timber harvesting and processing machines and trucks. We know we will attract loads of clients from the first day we open our doors for business.

Our weakness could be lack of finance, high debt burden, cost structure, lack of scale compared to our peers who have already gained ground in the timber harvesting cum logging industry.

• Opportunities:

The opportunities that are available to us as a timber harvesting company operating in the United States of America are online market, new services, new technology, and of course the opening of new markets within our target locations.

Some of the threats that we are likely going to face are mature markets, bad economy (economy downturn), stiff competition, volatile costs, and rising fuel prices. Basically, just like any other business, one of the major threats that we are likely going to face is economic downturn.

It is a fact that economic downturn affects purchasing / spending power. Another threat that may likely confront us is the arrival of a timber harvesting and processing company in same location where ours is located. unfavorable government policies can also pose a major threat to businesses such as ours.

7. MARKET ANALYSIS

• Market Trends

The market trend as it involves the timber harvesting industry especially in the United States of America is indeed dynamic and at the same time highly competitive and challenging.

But one thing is certain, once a timber harvesting and processing company can gain credibility, it will be much easier for the company to secure permanent deals / contracts with big time construction companies, furniture manufacturers and paper production companies who are always carrying out construction works on a regular basis.

If you are a close observer of the trends in the timber harvesting industry, you will notice that revenue generated by players in the industry has registered a sharp increase over the last half decade. This is supported by the increase in demand from downstream construction industries.

So also, improvement in performance from the industry matched with the rapid expansion in demand for timber in the booming housing market and nonresidential building market in the United States. Going forward, industry revenue is expected to continue growing, albeit at a slower pace.

Another common trend in this industry is that once a timber harvesting and processing company has gained credibility, it is easier for them to go for brand new trucks and timber harvesting and processing machines as against making use of second hand trucks and timber harvesting and processing machines which are usually expensive to maintain.

8. Our Target Market

Our target market are basically construction companies and of course any other company that makes use of timber. We cover both short distance (inter states) and long distance (intra states). We are in business to harvest, processed and supply timbers within the United States.

In other words, our target market is the whole of the United States of America and below is a list of the people and organizations that we have plans to do business with;

• Construction companies
• Paper Pulp companies
• Furniture manufactures
• Cottage companies that make use of processed timber

Our Competitive Advantage

We are aware of the competitive nature of the timber harvesting industry and we are ready to get into the mix and favorably compete with players in the industry. Our major competitive advantage is the vast industry experience and solid reputation of our owner, Bradford Lugard and our management team.

Bradford Lugard™ Timber Harvesting & Processing, Inc. no doubt is a timber harvesting and processing company, which is why we took our time to do a thorough market research and feasibility studies before launching the business.

We were able to highlight some factors that will give us competitive advantage in the marketplace; some of the factors are trust, honesty, good network and excellent relationship management, qualified and experienced management team, robust fleet operations, direct access to forests and construction sites in the United States of America, our size and cost advantage, supply chain, customer loyalty and strong reputation amongst domestic industry players.

Another competitive advantage that we are bringing to the industry is the fact that we have designed our business in such a way that we can comfortably work with both individual clients (contractors) and big construction companies.

Lastly, our employees will be well taken care of and their welfare package will be among the best within our category in the industry meaning that they will be more than willing to build the business with us and help deliver our set goals and achieve all our business aims and objectives.

9. SALES AND MARKETING STRATEGY

• Sources of Income

Bradford Lugard™ Timber Harvesting & Processing, Inc. will ensure that we leverage on our strength and the opportunities available to us in the U.S. to generate enough income that will help us drive the business to stability. We will go all the way to explore every available source of income in the timber harvesting industry.

Below are the sources we intend exploring to generate income for Bradford Lugard™ Timber Harvesting & Processing, Inc.;

• Cutting, skidding, on-site processing, and supply of logs

10. Sales Forecast

One thing is certain; there would always be construction companies and other related businesses that would need the timbers from time to time.

We are well positioned to take on the available market in the United States of America and we are quite optimistic that we will meet our set target of generating enough profits from our first six months of operation and grow our business and our clientele base.

We have been able to critically examine the timber harvesting market in the United States of America, we have analyzed our chances in the industry and we have been able to come up with the following sales forecast. The sales projections are based on information gathered on the field and some assumptions that are peculiar to similar startups in the United States of America.

• First Fiscal Year: $350,000
• Second Fiscal Year: $750,000
• Third Fiscal Year: $1,000,000

N.B : This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and natural disasters within the period stated above.

So also, there won’t be any major competitor (timber harvesting and processing company) offering same services as we do within the same location. Please note that the above projection might be lower and at the same time it might be higher.

• Marketing Strategy and Sales Strategy

No doubt, networking is an effective way to begin building your client base as a business man or woman and we have plans in place to leverage on all networks. In view of that, we will look out for gatherings where we can network with captain of industries, construction contractors, paper manufacturing companies and furniture manufacturing companies et al.

As a matter of fact, our first port of call will be to connect with the nearest Chamber of Commerce; we are likely going to get our first major deal from them.

At Bradford Lugard™ Timber Harvesting & Processing, Inc. all our employees will be directly or indirectly involved in sales and marketing of our products. We will create provision for our employees to earn commission when they bring in business for the organization.

We will also encourage freelancers to work with us; whenever they refer clients to us they will earn a percentage of the deal as agreed by both parties.

Lastly, we will leverage on the power of the media by advertising our services using both online and offline platforms. We will work hard to ensure that get repeated business from any business deal we execute. In summary, Bradford Lugard™ Timber Harvesting & Processing, Inc. will adopt the following sales and marketing strategies in sourcing for clients for our business;

• Introduce our business by sending introductory letters alongside our brochure to corporate organizations, businesses in the construction industry, paper manufacturers, furniture manufacturers and related industries in Des Moines – Iowa and throughout the United States
• Print handbills about our timber harvesting and processing company and its locations and drop them in public facilities.
• Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get our message across, so that those on the social media or those who read blogs can know where to go when they need the processed timber
• Creating a basic website for our business, so as to give our business an online presence
• Directly market our business.
• Join local timber harvesting and processing company associations and chambers of commerce for industry trends and tips
• Advertise our business in community – based newspapers, local TV and radio stations
• List our business on yellow pages ads (local directories)
• Encourage the use of Word of mouth marketing (referrals)

11. Publicity and Advertising Strategy

Bradford Lugard™ Timber Harvesting & Processing, Inc. has a long – term plan of operating in various locations (major timber sites) in the United States which is why we will deliberately build our brand to be well accepted in Des Moines – Iowa before venturing out to other cities both in the United States of America.

As a matter of fact, our publicity and advertising strategy is not solely for winning customers over but to effectively communicate our brand. Here are the platforms we intend leveraging on to promote and advertise Bradford Lugard™ Timber Harvesting & Processing, Inc.;

• Place adverts on both print (community – based newspapers and magazines) and electronic media platforms
• Sponsor relevant community programs
• Leverage on the internet and social media platforms like; Instagram, Facebook, Twitter, et al to promote our brand
• Install our billboards in strategic locations all around Des Moines – Iowa
• Distribute our fliers and handbills in target areas
• Position our Flexi Banners at strategic positions in the location where our photo booths are located.
• Ensure that all our workers wear our branded shirts and all our trucks are well branded with our company’s logo

12. Our Pricing Strategy

Bradford Lugard™ Timber Harvesting & Processing, Inc. has a lease arrangement with various companies and the company’s pricing is based on miles per thousands of tons of processed timbers purchased and transported. We have perfected our plans to charge competitive rates since we have minimal overhead compared to our competition in the industry.

We will ensure that we leverage on price to win over customers; our prices will be affordable and negotiable. The fact that our business door is open to both individuals and corporation organizations means that we will have different price range for different category of clients.

We are aware that government contracts come with a bidding template, we will ensure that we abide by such bidding templates whenever we have the opportunity to bid for government contracts. As the business grows, we will continue to review our pricing system to accommodate a wide range of clientele.

• Payment Options

The payment policy adopted by Bradford Lugard™ Timber Harvesting & Processing, Inc. is all inclusive because we are quite aware that different customers prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America.

Here are the payment options that Bradford Lugard™ Timber Harvesting & Processing, Inc. will make available to her clients;

• Payment via bank transfer
• Payment via credit cards/Point of Sale Machines (POS Machines)
• Payment via online bank transfer
• Payment via check
• Payment via mobile money transfer
• Payment via bank draft

In view of the above, we have chosen banking platforms that will enable our client make payment for timbers purchased without any stress on their part. Our bank account numbers will be made available on our website and promotional materials to clients who may want to deposit cash or make online transfer for our processed timber.

13. Startup Expenditure (Budget)

In setting up any business, the amount or cost will depend on the approach and scale you want to undertake. If you intend to go big by renting a place, then you would need a good amount of capital as you would need to ensure that your employees are well taken care of, and that your facility is conducive enough for workers to be creative and productive.

This means that the start-up can either be low or high depending on your goals, vision and aspirations for your business.

The tools and equipment that will be used are nearly the same cost everywhere, and any difference in prices would be minimal and can be overlooked. As for the detailed cost analysis for starting a timber harvesting and processing company; it might differ in other countries due to the value of their money.

When it comes to starting a timber harvesting and processing company, the major areas that you look towards spending the bulk of your cash is in the purchase of standard timber harvesting and processing machines and trucks and of course renting or leasing a facility large enough to accommodate your trucks and processing plant.

Aside from that, you are not expected to spend much except for paying of your employees, maintaining your trucks and fueling. These are the key areas where we will spend our startup capital;

• The total fee for incorporating the Business in the United States of America – $750.
• The budget for liability insurance, permits and license – $2,500
• The amount needed to acquire a suitable office facility with enough parking space for our trucks in Des Moines – Iowa for 6 months (Re – Construction of the facility inclusive) – $40,000.
• The amount required to finance the purchase of the first set of trucks and timber harvesting and processing machines – $200,000
• The cost for equipping the office (computers, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – $5,000
• The cost of accounting software, CRM software and Payroll Software – $3,000
• Other start-up expenses including stationery – $1000
• Phone and Utilities (gas, sewer, water and electric) deposits – ( $3,500 ).
• Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $40,000
• The cost of launching our official website – $600
• The amount needed to pay staff for the first 2 months – $20,000
• Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $2,500

Going by the report from the market research and feasibility studies conducted, we will need about three hundred and fifty thousand ( 350,000 ) U.S. dollars to successfully set up a medium scale but standard timber harvesting and processing company in the United States of America.

Generating Startup Capital for Bradford Lugard™ Timber Harvesting & Processing, Inc.

Bradford Lugard™ Timber Harvesting & Processing, Inc. is a family business that will be owned and managed by Bradford Lugard and his immediate family members. They are the sole financiers of the business which is why they decided to restrict the sourcing of startup capital to just three major sources.

These are the areas we intend generating our startup capital;

• Generate part of the startup capital from personal savings and sale of stocks
• Generate part of the startup capital from friends and other extended family members
• Generate a larger chunk of the startup capital from the bank (loan facility).

N.B: We have been able to generate about $100,000 ( Personal savings $80,000 and soft loan from family members $20,000 ) and we are at the final stages of obtaining a loan facility of $200,000 from our bank. All the papers and documents have been duly signed and submitted, the loan has been approved and any moment from now our account will be credited.

14. Sustainability and Expansion Strategy

The future of any business lies in the number of loyal customers that they have, the capacity and competence of the employees, their investment strategy and the business structure. If all of these factors are missing from a business, then it won’t be too long before the business closes shop.

One of our major goals of starting Bradford Lugard™ Timber Harvesting & Processing, Inc. is to build a business that will survive off its own cash flow without the need for injecting finance from external sources once the business is officially running.

We know that one of the ways of gaining approval and winning customers over is to engage in affordable and efficient timber harvesting, processing and supply services at all times.

Bradford Lugard™ Timber Harvesting & Processing, Inc. will make sure that the right foundation and processes are put in place to ensure that our staff welfare are well taken of. Our company’s corporate culture is designed to drive our business to greater heights and training and retraining of our workforce is at the top burner.

As a matter of fact, profit-sharing arrangement will be made available to all our management staff and it will be based on their performance for a period of three years or more. We know that if that is put in place, we will be able to successfully hire and retain the best hands we can get in the industry; they will be more committed to help us build the business of our dreams.

Check List/Milestone

• Business Name Availability Check: Completed
• Business Incorporation: Completed
• Opening of Corporate Bank Accounts various banks in the United States: Completed
• Opening Online Payment Platforms: Completed
• Application and Obtaining Tax Payer’s ID: In Progress
• Application for business license and permit: Completed
• Purchase of Insurance for the Business: Completed
• Acquiring of trucks and relevant equipment: In progress
• Leasing of Office Facility in Des Moines – Iowa: Completed
• Conducting Feasibility Studies: Completed
• Startup Capital Generation: Completed
• Writing of Business Plan: Completed
• Drafting of Employee’s Handbook: Completed
• Drafting of Contract Documents: In Progress
• Design of The Company’s Logo: Completed
• Printing of Promotional Materials: Completed
• Recruitment of employees: In Progress
• Purchase of the needed furniture, office equipment, electronic appliances and facility facelift: In progress
• Creating Official Website for the Company: In Progress
• Creating Awareness for the business (Business PR): In Progress
• Health and Safety and Fire Safety Arrangement: In Progress
• Establishing business relationship with key players in the construction industry, furniture making industry and paper manufacturing industry: In Progress
• Leasing of the first set of timber harvesting and processing machines and trucks: In Progress

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What We Know About Kamala Harris’s $5 Trillion Tax Plan So Far

The vice president supports the tax increases proposed by the Biden White House, according to her campaign.

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By Andrew Duehren

Reporting from Washington

In a campaign otherwise light on policy specifics, Vice President Kamala Harris this week quietly rolled out her most detailed, far-ranging proposal yet: nearly $5 trillion in tax increases over a decade.

That’s how much more revenue the federal government would raise if it adopted a number of tax increases that President Biden proposed in the spring . Ms. Harris’s campaign said this week that she supported those tax hikes, which were thoroughly laid out in the most recent federal budget plan prepared by the Biden administration.

No one making less than $400,000 a year would see their taxes go up under the plan. Instead, Ms. Harris is seeking to significantly raise taxes on the wealthiest Americans and large corporations. Congress has previously rejected many of these tax ideas, even when Democrats controlled both chambers.

While tax policy is right now a subplot in a turbulent presidential campaign, it will be a primary policy issue in Washington next year. The next president will have to work with Congress to address the tax cuts Donald J. Trump signed into law in 2017. Many of those tax cuts expire after 2025, meaning millions of Americans will see their taxes go up if lawmakers don’t reach a deal next year.

Here’s an overview of what we now know — and still don’t know — about the Democratic nominee’s views on taxes.

Higher taxes on corporations

The most recent White House budget includes several proposals that would raise taxes on large corporations . Chief among them is raising the corporate tax rate to 28 percent from 21 percent, a step that the Treasury Department estimated could bring in $1.3 trillion in revenue over the next 10 years.

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