Unlocking Value, Reaching for the Big Blue

Unlocking Value, Reaching for the Big Blue

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According to Dustin Rebello, corporate finance executive at Mazars, if we are to believe the latest reports and company surveys, then it appears the financial crisis of 2007/2008 is largely over. But what does this mean for those businesses that are still standing?  Is it back to business as usual, or is there a silver lining to the dark cloud that has been the financial crisis?

“While a recession is never a pleasant experience, it is sometimes a useful and necessary part of economic reform. Post-recession economies often provide many opportunities for companies to grow, either organically or through acquisitions,” says Rebello.

Understanding business growth

“The predicament many owner managed businesses (OMBs) find themselves in is that they want to grow their business but they simply do not know how,” says Rebello. “They may have the skill and ability to take their business through the set-up and even the survival phase, but they plateau thereafter, despite their best efforts to move into the growth phase.”

The growth phase can often be challenging in that a business that is growing rapidly changes from year to year, sometimes even month to month. Business owners must constantly evaluate and assess their business, to ensure they continue to understand it and its needs.

For many OMBs this evaluation and assessment can become complicated, so much so that they are often not willing or able to handle it. “If you are an OMB that falls into this category, does this mean you have no choice but to make yourself at home on the plateau of mediocre growth? Thankfully, there is more than one way of unlocking value,” says Rebello.

“A business can unlock its value in two ways; through growth or through sale.  While growth demands expertise and time, sale can be an easier and quicker, though less rewarding, alternative.  If you do not wish to sell your entire business, by selling a portion of your business you may be able to obtain an equity partner that has the necessary skills and expertise needed to take your business to the next level.”

Increasing value

Regardless of how you try to unlock the value of your business, the fundamentals of increasing value are relatively the same:

  • Understand the key value drivers of the business.  Determine whether your company is volume or margin driven.  Often a 1 % increase in your operating profit percentage can be better than a 5 % increase in sales.
  • Keep reliable and accurate accounting records.  Your accounting records are the blueprints of your business. They help owners determine what is happening in the business and inform potential investors of a sound investment.
  • Keep it clean and above board.  Those tempted to sneak personal expenses into the business or not disclose all of their revenue, should keep in mind that this will ultimately drive down the value of the business.  Additionally, the more you grow the more you risk attracting the unwanted attention of tax and other regulatory authorities.
  • Keep it simple. The more complicated something is the more likely it is to be misunderstood and the more likely things are to go wrong.
  • Acknowledge that you cannot do it all.  Sometimes you need professional help.  While you may feel this is an unnecessary expense, the benefits gained can often be well worth the cost.
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