Entrepreneurship and Small Business (ESB) Certification Practice Exam

In which business life cycle stage is Michael if he is approached by a larger company for purchase?

1. Existence

2. Survival

3. Success

4. Exit Plan

The correct answer is: Exit Plan

When a business is approached by a larger company for acquisition, it indicates that the business is at a stage where it has established itself and gained recognition in the market. This situation usually aligns with the exit plan stage of the business life cycle. During the exit plan phase, the owner is looking to sell the business or transfer ownership, typically after having achieved a level of success and stability. This stage often involves strategic planning for selling, which can include assessing the company's value, potential buyers, and the implications of the sale for existing operations, employees, and customers. In contrast, the existence stage is characterized by establishing the business and its initial operations, the survival stage focuses on maintaining operations and ensuring the business can continue to run, and the success stage generally revolves around growing the business further rather than planning for an exit. Thus, being approached for a purchase signals a mature business consideration, which aligns directly with an exit plan strategy.