Why Your Business Should Function Without You In It

Why Your Business Should Function Without You In It

SHARE

How many businesses have you come across where the entrepreneur does well? He lives in a good suburb in a beautiful home, has kids at a good school, drives a nice car and goes on holiday with his family. Life is good.

He’s been running a solid business for nine years, with 25 years of business experience, and like most entrepreneurs it’s the biggest draw on his energy and resources because he sees it as an asset that forms the backbone of his financial security.

Clive is an example of a problem many entrepreneurs face. He’d grown his networking and connectivity firm to 38 staff, but after a heart attack at 57 he scaled back to 26 staff and reduced complexity, but still drew a good salary.

Related: 3 Rules for Selling a Business: Lessons From the HP-Autonomy Fiasco

He was approached two years ago with an offer of R23 million for the business based on his accountant’s numbers.

The number he wasn’t expecting

Before the deal was closed, a gruelling due diligence was performed by the listed company. To his horror the price was then revised to R10 million and he’d need to sign a five-year employment contract with the listed company.

 

Entrepreneur-Newsletters
Entrepreneur’s daily tips & insights delivered direct to your inbox.

The reasons for the new offer were legitimate, ranging from Clive being indispensable in the daily operations of the business, management accounts that were poorly presented, poorly structured staff and client contracts, and a number of other factors that questioned the certainty of future cash flow streams.

Ultimately, the business was not an asset without Clive to lead it, a restructured organogram, renegotiated client contracts, and the renewal of a number of agency agreements.

The deal collapsed

To get the number he wants and deserves for his business, Clive’s had to begin a rigorous restructure of the business and has engaged with Aurik to guide him through the process of building his business into an asset of value. Ultimately, for it to be saleable, the business needs to function without Clive.

Related: What’s Your Start-up Worth?

Pavlo Phitidis
Pavlo Phitidis is the CEO of Aurik Business Incubator, an organisation that works with entrepreneurs to build their businesses into valuable assets. Pavlo is a regular commentator on entrepreneurship on 702 Talk Radio and 567 Cape Talk Radio. He can be contacted at www.aurik.co.za