- Company: Sasfin Corporate Finance
- Contact: +27 (0)11 531 9281
- Visit: sasfin.com
Uncertainty is nothing new to any business manager. This uncertainty essentially comes in two forms: Exogenous risks and Endogenous risks. A manager can control the internal risks in an organisation but exogenous risks are harder to control and these risks are linked to macro-economic events which are almost completely out of the control of a business manager.
One could try to rely on the views of economists but then again, as the age old saying goes: “The only way to trust an economist is to chop off one hand so that the economist can’t say ‘on the other hand…’.”
The key to managing ever-changing external influences on a business, is to constantly evaluate these influences and remain adaptive. This often leads a business manager on the path to raising capital.
Quite often, and particularly during challenging macro-economic environments when a business manager needs to keep a close eye on the operations of the business, they may need to seek assistance from advisors to conclude not just a ‘life-raft’ capital raise, but rather a bespoke capital raise, to ensure the economic storm is weathered and the business is poised to continue growing and capitalising on the opportunities presented by difficult times.
The source of capital is dependent on numerous factors, such as the cash-generating ability of the business, business sensitivity relative to the business cycle, health of the balance sheet and the management team/shareholders’ ultimate objectives.
Cash-generating ability of the business
A cash-generative business is any investor’s dream. Obviously the ability for the business to raise capital is dependent on existing debt obligations and how amenable the shareholders are to the type of capital injected into the business.
Raising capital for a profitable business that has a consistent track record, even during poor macro-economic environments, is usually doable as it offers a positive return for investors and financiers.
The question is whether to raise equity or debt? To answer this question, one would first need to assess the current and target capital structures of the business. It is advisable, where not clear-cut, to engage with a professional advisor to assess your business’s capital structure.
Should this exercise indicate a need for equity capital, for a private business, the most efficient way to raise equity would be through a structured process designed to attract potential investors with the right pedigree and access to capital to enable your business to exploit opportunities.
A further option, which may be viable for some companies, would be to pursue the option of listing on a recognised stock exchange. This has the benefit of either raising capital on listing or post-listing, and being able to access public capital markets more frequently than when a company was privately held.
Business’s sensitivity relative to the business cycle and health of the balance sheet.
Should this exercise result in the answer that debt is the most appropriate form of capital to raise, it would be important to consider the key characteristics of debt: Debt can be cheaper yet potentially more demanding on cash resources that the business may want to hold onto during tough times e.g., by way of contrast, although more expensive, equity requires no interest to be serviced or capital to be repaid and constitutes a more patient type of capital.
Most businesses are sensitive to a business cycle, but on the odd occasion there are businesses that are agnostic to the business cycle. The reason for this is either that the underlying business is relatively indifferent to the business cycle or the manager of the business has structured a business that has a diverse income stream coupled with an entrepreneurial mindset.
Usually during times of poor economic growth a business may experience an environment of low interest rates. Therefore, raising debt through either a credit facility or an existing note programme is less expensive than raising equity capital from investors who expect higher returns. Furthermore, where debt is raised in the production of income, the interest incurred on this debt would normally be fully deductible in terms of South Africa’s income tax legislation.
That said, there is an old joke about bankers: “A banker is the type of person who will lend you an umbrella when the sun is shining and demand it back when it starts raining.”
Consequently, during times of poor economic growth, a bank’s willingness to extend new lines of credit is often restricted. That’s why being able to access alternative debt sources or ensuring that the business has excess capacity in terms of its existing credit facilities with a bank is important. A proven track record of being able to service a debt obligation goes a long way when applying for new facilities. An important consideration to note is that a bank or a funder may enforce stricter covenants in an environment of poor economic growth if new debt is raised (and sometimes even on existing facilities).
An alternative to debt or equity is preference shares. The problem faced by companies accessing the South African preference share market is that investors are still mindful of the fairly recent demise of African Bank. That said, we have noticed renewed demand in this market and, for the right types of business, this is a very attractive alternative to raise quasi equity finance. The main alternatives would be issuing perpetual (i.e. non-redeemable) or redeemable preference shares. This decision, taken in consultation with a company’s advisors, will need to be carefully assessed depending on the company’s needs.
Finally, the key to any capital raise during trying times ultimately rests with the management team. A good manager with an adaptive and positive attitude, and supportive shareholders will make the process of raising capital in times of economic stress easier.
With Hundreds Of Franchise Options Out There, Choose The One You Can Trust
If you’re looking to invest in a business venture that offers you years of experience in the industry, the trust and loyalty of its customers, and franchise support from an expert team – then Hi-Q is the one for you.
What you’ll become a part of
Since opening their doors in 1999, Hi-Q has gone from strength to strength, growing a humble three store enterprise into an extensive 130-store franchise network with a unique multi-product and multi-services automotive offering.
Hi-Q’s approach to business is centred around being ‘the one you can trust’ to their customers, their suppliers and their franchisees.
“That has always been the key driver in everything we do,” says Sean Harrison, Hi-Q’s Managing Director. “For example, when it comes to our customers, they need to know they can rely on us to put their safety first.
That we’ll always strive to offer them expert, friendly service and top of the range products, while also keeping up-to-date with the latest technologies and advancements in our field.”
An acclaimed and awarded brand
Hi-Q has again and again proven themselves to be a leader in the industry.
They’ve been voted South Africa’s No.1 tyre retailer for eight consecutive years (2010 – 2017) by consumers in the Ask Africa Icon Brands Survey, the biggest of its kind in Africa – a clear indication that they are respected and trusted by their customers.
Hi-Q Franchisees all have the support of an expert and knowledgeable team with years of experience in the industry, who are available to guide them on their business venture. This includes areas of business such as marketing/promotional, commercial, organisational structure, tools and equipment, sales and more.
Franchisees also have access to various skills training opportunities for members of their team.
Hi-Q is invested in providing their network with the tools needed to thrive and grow in an ever-challenging market.
Relationship with Goodyear
Hi-Q has the support and backing of international tyre of multinational premium tyre manufacturer, Goodyear, and its full value proposition. This means access to incredible promotional and marketing opportunities in partnership with the brand.
Hi-Q has embarked on an extensive expansion plan and have identified areas of opportunity to extend their Franchise footprint growth countrywide.
You’ll find more information on our website www.hiq.co.za We’d like to invite those who are interested to become part of our team to contact 011 663 2431 or firstname.lastname@example.org
Get The Edge This Winter
Five short courses from WITS kicking off in July will give you the competitive edge.
From Gauteng’s most trusted provider of the best learning experiences, come five WITS-curated courses starting in July 2019. Use the longer, colder days to curl up with a “good book” and emerge from winter with a new edge.
There are three online short courses offered via the WITS Digital Campus, starting 15 July.
Managing Labour Relations
This 10 week course will equip you with sound knowledge of South Africa’s complex labour landscape and an understanding of your legal rights as an employee or employer.
You will also learn skills for navigating employer / employee relationships successfully, and get tools for managing disputes effectively. There are eight modules, covered in online lectures over eight weeks, requiring a commitment of five to seven hours per week. The exam is in week 10.
Logistics and Supply Chain Management Practice
This 10 week course is packed with practical and theoretical information to help retail managers, supply chain supervisors, stock controllers and even CEOs drive efficiencies in the value chain.
It covers everything from improving exporting transportation, warehousing, order processing and procurement to financial management and managing waste. There are eight modules, covered in online lectures over eight weeks, requiring a commitment of five to seven hours per week. The exam is in week 10.
Applied Digital Marketing
We operate in an increasingly digital world and traditional marketing must include digital aspects and channels to be relevant.
This 10 week course will teach you to think digital, talk digital and deliver effective digital campaigns to elevate marketing and brand-building initiatives. You will learn to conceptualise and implement successful digital marketing strategies that drive customer acquisition, optimise your digital footprint and deliver business results.
There are eight modules, covered in online lectures over eight weeks, requiring a commitment of five to seven hours per week. The exam is in week 10.
Comprehensive onsite courses in July include:
Real Estate Investment Analysis
This intensive five day course is for people who have been introduced to the real estate discipline at NQF 4 and NQF 5 levels. It is designed to provide higher level, more focused training as well as tools for analysing different types of real estate investments at the individual asset level, and measuring investment performance.
The course will benefit property practitioners who do not have property degrees; past graduates of SAPOA programmes in different aspects of the real estate business and people from different disciplinary backgrounds considering entering the profession. The course takes place over five days from 1 to 5 July 2019.
Advanced Performance Management
Presented by the School of Accountancy together with Wits Enterprise, this course is designed to prepare students for the Association of Chartered Certified Accountants (ACCA) Professional level exams.
On completion of this course, you will be able to:
- Use strategic planning and control models to plan and monitor organisational performance
- Assess and identify key external influences on organisational performance
- Apply strategic performance measurement techniques in evaluating and improving organisational performance
- Advise on business performance evaluation as well as recognize vulnerability to corporate failure
The course will run from 15 July to 22 October 2019.
For more information on registering for any of these courses, criteria for registering, and costs, visit.
This article was originally posted on Entrepreneur.com/sa.
The Importance of Outsourcing Your Payroll
One of an organisation’s biggest overheads is that of salaries and wages. And yet, if these are not processed on time, it can negatively impact staff morale and create the impression that the company is not financially stable.
For a small business, payroll is normally the responsibility of an accountant or bookkeeper, but even administrators can sometimes be roped in to do the job, even though they have no expertise in the matter. This is where the value of outsourcing your payroll comes in.
When should you outsource?
- If you want to grow your business but are not aware of ongoing legislative changes that could pose a risk to your company, then it is better to get professionals to assist.
- Accountants and bookkeepers are not specialists and do not keep up with the compliance environment. If you outsource your payroll, you enable them to focus their core duties and not get bogged down by legislative complexities.
How to choose an outsourced service provider
Understandably, payroll is a sensitive subject dealing with highly confidential information.
This is often the last thing a small business owner wants to outsource. It is therefore vital that the company does its homework and researches the potential outsourcing partner thoroughly.
Instead of going with the first available service provider or the cheapest one, here are some questions to ask:
- Is the service provider a one-man band and, if so, what backup resources are available?
- Is the service provider a recognised payroll provider belonging to a professional body?
- Do they have the necessary training and skills on payroll?
- What does the service provider do to ensure it stays up to date with legislation?
- How secure is the payroll data and can the service provider take on historic data?
- How easy is it to recover your payroll data in the event of a disaster?
- What value-adds can the service provider offer? These can include anything from leave management and third-party payments, to employee self-service, time and attendance management, and any other related human resource service.
- Can they process salaries and/or wages hourly, weekly, fortnightly, or monthly?
- Can the service provider accommodate your growth requirements if you open new branches?
- Is the service provider able to assist with payrolls in other African countries, manage their currencies, and deal with their regulatory environments?
- What processes are in place to ensure the timeous processing of payrolls?
The advantages of outsourcing your payroll
One of the most obvious benefits of going the outsourcing route is freeing up your resources to focus on your core strategic objectives. This ensures you provide quality of service and control costs while an experienced partner takes care of your payroll.
Here are a few other benefits:
- Reduce operating costs.
- Statutory compliance and consistent service delivery.
- Access to the latest technology, as well as skilled and dedicated payroll resources.
- Access to a secure, risk-free and confidential payroll environment.
- Increased flexibility and responsiveness.
- Streamlined internal processes and procedures.
This article was originally posted on Entrepreneur.com/sa.