InsulTec: A Small Business at a Crossroad
In January 2009, Ed Huegel, owner of InsulTec, a small foam insulation installation company in Alta Vista, Iowa, needed to make a decision. Ed had owned InsulTec for nine years. During that time he had successfully grown the business, and had implemented several innovations that enabled the business to generate healthy annual revenues while maintaining acceptable profit margins. However, the Great Recession was at hand and construction jobs were particularly hard to come by, as was financing. There was a bright spot, however, in agricultural buildings. As Huegel approached his 60th birthday, he was reminded of just how challenging this business was. An unexpected offer to purchase InsulTec motivated Ed to take a hard look at a few opportunities: (a) sell the business to one of his adult children, (b) grow InsulTec by diversifying and expanding his sales territory to eight states, or (c) sell InsulTec to an interested contractor.
In completing this assignment, students should be able to:
1. Understand the difference between a “lifestyle” and a “start-up” business
2. Discuss different exit strategies for small business owners
3. Understand what it means for a small business to diversify
4. Identify personal, family, and business-related factors an entrepreneur should consider when evaluating exit strategies and diversification strategies
5. Develop criteria for the small business owner to use when evaluating exit and diversification options
6. Calculate a business valuation for InsulTec using the adjusted net earnings method (applying a multiple) and the adjusted net assets method
This critical incident is most appropriate for undergraduate and graduate courses in entrepreneurship and general business.