The Money Show with Bruce Whitfield, Pavlo Phitidis set out to answer some big questions from business owners, like you:
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.
I’ve recently read through oodles of business plans, with a sample of ten showing me that: 4 were applying for growth funding; 2 were applying for innovation funding; 2 were looking to fund operations; 1 was looking to fund their business through a share acquisition strategy, and 1 was looking for acquisition funding.
But what makes a business plan truly effective, and just how important are they? For funders and interested stakeholders, business plans are important for evaluating a business’ investment potential. But, unless a business plan has right kind of components; is implemented in the right kind of way, that’s customized to be relevant to its purpose and is – always – a working document, it’s useless. Your business plan should be an introductory document, that invites potential funders and investors into a conversation with you, whether that be a casual meetup or a more formal meeting. It’s an important document, so don’t rely on templates or external specialists to write it for you. The reality of a business plan is that it won’t roll out in real life, but it will serve as a working guideline. On this week’sThe Money Show with Bruce Whitfield, we considered what goes into writing the right kind of business plan:
Section 12J investment funds are an attractive option for investors. When first created during the mid-1990s as part of the Income Tax Act, Section 12J was a well-intended, but unwieldly, piece of legislation. During 2010, we gathered collaborators – including SAICA, the Banking Council, SAVCA, and more, to work on re-engineering the legislation. Eventually, amendments to Section 12J were gazetted and, nowadays, it’s hugely improved. On this week’s The Money Show with Bruce Whitfield, we outlined the ins and outs of Section 12J and put together some guidelines for how you can spot the good, and the bad, small business venture capital investment opportunities:
We have seen a common theme emerging in our recent meetings with various entrepreneurs. As a business owner, you might be wondering how best to position yourself for the future amid South Africa’s junk status and unpredictable economy. You might be thinking about how to make the best of your business in this context, but also how you put yourself in the best position. You need your business to be a success without having to tire yourself out and being involved in the day-to-day operations. To be profitable, you must increase sales without spending more or allocating more resources. But isn’t there an easier or more efficient way of doing this than killing yourself by trying to be on top of every aspect of your business?