The resignation of Robert Mugabe and the current race for power within the ANC have highlighted the importance of succession planning within the political landscape, but just how important is it for your business? Statistically, just 28% of succession plans end up being truly successful. On this week’s The Money Show with Bruce Whitfield, we considered the all-important questions you need to ask of yourself, and of your business, when creating a succession planning strategy for your business:
On Monday, 21 August, we spoke to Bruce Whitfield on The Money Show on Radio 702 and Cape Talk of that day’s R450 million sale of the Gupta media assets, ANN7 and The New Age, to Mzwanele “Jimmy” Manyi’s consortium, Lodidox.
The feature focused on the business valuation of media assets and made business owners aware of the importance of a correct business valuation in assessing their enterprise as an Asset of Value when they put it on sale.
The feature also highlighted the methods of business valuation, the risks involved for the buyer and why they should be aware of these factors.
By Pavlo Phitidis
Building a family business, and passing it down as both a legacy and an asset, is seldom achieved. A mere 30% of family businesses passed on to the next generation survive, and only 12% making it to the second generation. A tiny 3% survive to the third. This week, on The Money Show with Bruce Whitfield, we outlined the ways succession plans go wrong, and how you can ensure your family business enjoys not only longevity, but long-term success too:
Despite what you may think or feel, doing it on your own won’t set you on a pathway to success. You can’t build a business without people and - as we discussed onThe Money Show with Bruce Whitfield – if you want to sell your business, you’ll need to learn to delegate:
People sell their businesses for many reasons. Fatigue from too many years in the game is one of the most common. They might also choose to sell their business when they reach retirement age or fall ill and cannot work in it any more. Sometimes, increased competition drives them out of the market. Some business owners start their businesses with a planned sale in mind. Whatever your reasons, nothing can prepare you for the setback when you find that you can’t actually sell your business. That’s why it’s important to understand the factors that prevent your business from attracting buyers and how to bounce back and grow your business into an Asset of Value.
Factors that stall a sale
Buyers usually hesitate to close deals because they don’t see the value in the business they’re being offered. Many factors contribute to this, but the main ones are:
- The business is too dependent on the owner – If a business relies on its owner to operate at its best, it’s not an attractive purchase for buyers because they cannot buy the owner with the business. The same can be said if the business is too dependent on one employee, client or supplier.
- Buyers can’t identify any growth opportunities – Buyers are attracted to the future potential of the business and not just what the business can achieve now. In this case, value is shown by presenting convincing growth opportunities. These could be new locations for the business, other companies the business can buy out or new markets that the business can unlock. Anything which proves that the growth of the business won’t slow down or stop.
- The business is too similar to its competitors – Businesses that aren’t differentiated enough can only compete on price. The lower the price, the less cash is left over to grow the business.
- There isn’t enough free cash – Free cash is what’s left behind after working capital is spent. It’s a good measure of a business’s performance because it shows stakeholders and potential buyers how much money the business can dedicate towards growth.
- Legal issues – If you or your business are tied up in any legal disputes that could affect the business financially, there’s a slim chance of selling the business before all the legal issues are resolved.
Aurik nurtures your business for a sale
We work hand-in-hand with you to grow your business into an Asset of Value through careful analysis, focused goal-setting and sound business systems. A partnership with Aurik ensures that your business has a firm foundation from which to grow and expand.
We will collaborate with you and identify who your ideal customer is and how best to position your business so you can serve them optimally. This is supported by targeted and persistent marketing strategies and airtight business systems.
Aurik works with you to establish long-term value in your business. We want your business’s true value to show clearly in its processes, structures and operations – not in who owns it.
Would you like to have your pick of buyers when you’re ready to sell? Aurik can assist. Let us work with you to build your business into an Asset of Value and devise an effective exit strategy.
Britain broke market access with BREXIT, and Trump broke the Iran deal with just a tweet, but neither seemed to consider much of what comes next! How do you break a bad deal, without breaking your business? On The Money Show with Bruce Whitfield, Pavlo Phitidis outlined an exit plan for business owners, to use when a good deal goes bad: