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Build your Business Legacy through Succession Planning

Advice on building your succession planning with your family.

Standard Bank

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Diale-Mokgojwa

Sooner or later, most entrepreneurs must consider the future sustainability of the enterprises they have built. Eventually the business will have to be handed over to someone with the skills needed to usher the company into a new era.

Ensuring that this happens in a planned and effective manner requires the development of a realistic succession plan that anticipates the realities facing the business owner.

Diale Mokgojwa, Senior Manager, Enterprise Development at Standard Bank says the type of succession plan depends on the owner’s circumstances. However, in South Africa, the succession issues that most often have to be addressed in smaller businesses are whether a family member will take over, or if an ‘outsider’ is a more practical choice.

Likewise, attention needs to be paid to the options of selling a portion of the business and including loyal employees in the equation. Finally, the potential of structuring the succession plan to cater for Black Economic Empowerment (BEE) interests also has to be put on the table.

“These options can have far-reaching consequences on the business and thus require that the owner makes the decisions as unemotionally and practically as possible.”

Unfortunately, when it comes to family-owned businesses, ideals and reality do not always intersect where they should, says Mokgojwa.

 “It is not uncommon for someone who has spent his life building a business to have misgivings regarding the next generation’s commercial capability.”

The trouble with keeping it in the family

Typically, issues that can complicate keeping a business in the family include:

  • Family disputes. These vary, but often centre on disagreements involving the present owner’s successor.
  • Complications arise when the present owner disagrees with the direction in which the new generation wants to take the business.
  • Inheritance issues. If the business can only support a few members of the owner’s immediate family, the others may feel aggrieved and expect compensation through a passive shareholding scheme.

“It takes courage and conviction to address these matters openly,” says Mokgojwa.  “However, it must be done and all issues must be resolved to avoid future conflict and to focus on the skills needed for the company’s survival.”

The succession plan

If a succession plan demands strategies to be put in place that do not include the family, several other alternatives remain to be considered, says Mokgojwa. These include:

  • Identifying a potential partner or partners to invest in the business. This will enable the owner to ensure that the skills required to develop the business are brought onboard, and sustainability is ensured as the people concerned will have a stake in the business.
  • Considering a BEE partner who has the skills and who will also increase the future viability of the business by opening up markets in key sectors, particularly government.
  • Evaluating the skills and commitment of key staff members and offering them shares in the business with the promise that when the time comes for the owner to depart, they can use a management buyout to buy the majority, or all, of the owner’s shares.
  • Offering staff the buyout option, but stipulating that the process will be accomplished through their purchase of shares on an ongoing basis that could take several years to accomplish. This enables the owner to withdraw over a long period, or even retain a small equity holding in the business that can be used to generate annuity income, or be kept in a trust for family members.

“Although any of the above solutions will ensure that the business remains sustainable and well-managed into the future, it is wise to remember that relationships have to be firmly based if potential conflicts are to be avoided,” says Mokgojwa.

“Mutual compatibility is the most important requirement when selecting a successor; having a common background, shared value system and enthusiasm for business all make it possible for a trusting, mutually beneficial relationship to develop and grow, making sure the future of the business is in good hands.”

What to include in the plan

When preparing a succession plan, care should be taken to identify:

  • A person who shares your values, entrepreneurial temperament and vision.
  • Partners who bring specific skills and experience to the business.
  • Someone who can bring capital, a business network and connections to the business.
  • A person who has high personal standards and business ethics.
  • Someone who you respect on a professional level, as you will then value their inputs.

“Developing a succession plan is vital; the sooner a need for a plan is recognised and the sooner it is accomplished, the easier it will be to concentrate on developing the value of the business, as you can rest assured that the business will remain intact in the future,” concludes Mokgojwa.

Related: How to Build Skills, Loyalty and Profits With Staff Training

Standard Bank SA is the largest operating entity of Standard Bank Group, Africa’s largest bank by assets. Standard Bank SA provides the full spectrum of financial services, with more than 720 branches and over 7 100 ATMs. Independent surveys of customer satisfaction consistently place Standard Bank at or near the top of their rankings. The personal and business banking unit offers banking and other financial services to individuals and small-to-medium enterprises. For further information, go to community.standardbank.co.za

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The Alfa Romeo Stelvio – More Than An SUV

The All-New Alfa Romeo Stelvio draws inspiration from the legendary mountain pass linking Italy to Switzerland, with 48 hairpins in quick succession.

Alfa Romeo

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The All-New Alfa Romeo Stelvio draws inspiration from the legendary mountain pass linking Italy to Switzerland, with 48 hairpins in quick succession. The Stelvio pass is widely seen as one of the most beautiful and engaging roads on the planet.

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Enhance Your Entrepreneurial Flair With An Online Postgraduate Diploma From The University Of Pretoria

The Department of Business Management at the University of Pretoria, a leader in business management education, will be offering an Online Postgraduate Diploma in Entrepreneurship for the 2018 academic year with some seminars to enrich your action learning experience.

Dr Alex Antonites

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The Department of Business Management at the University of Pretoria, a leader in business management education, will be offering an Online Postgraduate Diploma in Entrepreneurship for the 2018 academic year with some seminars to enrich your action learning experience.

The programme content focuses on the start-up processes, creativity and opportunity recognition, business planning and marketing as well as financial management. Furthermore, the programme emphasises entrepreneurial growth and small business policy development with relevance to the enabling environment.

Who should enrol?

The programme is designed for pre-, nascent and start-up entrepreneurs who want to attain an advanced degree in entrepreneurship. It is also intended for individuals who work in an entrepreneurial environment and are involved with small business policy development. Although many students in the programme have academic credentials in entrepreneurship or business management, the programme is also appropriate if your education and/or experience may be in other disciplines (e.g. engineering or medicine).

Admission requirements

A relevant bachelor’s degree.

Related: This Enterprises UP Expert Explains Why Start-Ups Really Fail

Additional programme information

The duration of the course is one year. The language of tuition is English and the course will be presented in two blocks by means of the blended learning method (70% online and 30% contact sessions). Students need continuous access to the internet to complete the course.

Course Contents

Overview of modules for Block A

  • Ideation-to-market: Starting up
  • International Business Venturing
  • Venturing Strategy Building (Part 1)

Overview of modules for Block B

  • Entrepreneurial Marketing
  • Entrepreneurial Supply Chain Management
  • Entrepreneurial Finance
  • Venturing Strategy Building (Part 2)

Click here for more information.

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Win A Business Makeover With Retail Capital To The Value Of R250 000

Retail Capital is giving SMEs an opportunity to win a makeover to build their brand with an investment of R250,000.

Retail Capital

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Retail Capital is giving SMEs an opportunity to win a makeover to build their brand with an investment of R250,000. During the summer campaign, SMEs are encouraged to share the vision of how they would like to see their business grow, and led by a team of experts, Retail Capital will work with the winning SME to help make their vision come true.

While South Africa’s economy is not faring well, Retail Capital CEO Karl Westvig remains optimistic about the country’s retail and hospitality sectors. “We are seeing some green shoots, with an increase in turnover in these sectors – starting from the end of September. Economic conditions remain very tough, but businesses seem to be trading well into October and we’re hoping this continues into the festive season trading.”

According to recent statistics from Statistics South Africa (Stats SA), South Africa’s retail sales rose by 5.5% year-on-year in August 2017, following a downwardly revised 1.6% gain in the previous month and above market expectations of 2.3%. It is the biggest gain in retail trade since August of 2012.

Related: How To Raise Working Capital Finance

“I do believe that these sectors will see an improvement during the summer season. But, key to this will be for small business owners to ensure that they have the right amount of stock, adequate cash flow, as well as other systems in place to meet the ever-changing needs of customers,” says Westvig.

For many small businesses, however, continually adapting to market changes requires cash injections that they don’t often have.

The prize includes the following:

  • Business plan/consulting
  • Marketing strategy
  • Design and branding
  • Website and social Media and,
  • R50k capital to gear your business.

Westvig explains that the summer campaign tagline ‘Your Vision. Our Belief’ really speaks to why Retail Capital first opened its doors. “Our goal is to see the potential of small businesses and to work with them in making these become a reality.”

He adds that the idea is not to simply help one business during the campaign either. Westvig points out that one of the biggest challenges that small businesses face in the sluggish economy is enough foot traffic through their doors. “Generally, the main hurdle in creating brand awareness and projecting credibility of their establishments boils down to establishing a strong online presence.”

“One of the first ways that South Africans identify a business or service provider that they want to work with is over social media – even in a country where the digital divide has traditionally separated the technological haves from the have-nots,” he says.

He explains that companies that don’t have a social media presence are running the risk of being overlooked entirely. “They may attract customers in their own community with signage or word of mouth, but to grow a business, they need to expand their reach – and that’s where social media comes in.”

But, the reality is that resource and time constraints mean that for many SMEs, social media is not prioritised. “Unfortunately for the average small business owner, they don’t have the time or expertise to get connected.”

Understanding the importance of having an online presence, Retail Capital has also committed to developing the digital presence of all campaign entrants. This would include setting up each entrant’s digital presence on platforms such as Google, Facebook, Twitter, Tripadvisor, Zomato and any others that may be relevant to their specific market or industry.

“As a partner to many SMEs in South Africa, we are continually looking at new and innovative ways to help provide them with the much-needed support in order for them to realise their visions. SMEs need to be supported with initiatives like targeted education and training, supportive legislation, and funding opportunities that collectively help them grow our national economy,” says Westvig.

Related: 6 Great Tips For A Successful Shark Tank Pitch

Who we are and what we do:

“More than R1.25 billion has been extended to a range of businesses including food trucks, hair salons, restaurants, spas and franchised retail stores. Many of these businesses have not been able to raise funding in any other way, other than to go to unscrupulous lenders,”says Karl Westvig, the CEO Retail Capital, a company that provides working capital with the help of innovative lending technology.

“We have also estimated that for every R160 000 we lend, we create a new job. This means that 625 jobs have been created purely by enabling small businesses to get the funding they need for working capital requirements or expansion opportunities.”

Retail Capital’s system, which enables it to advance funding to small businesses, based on real time information on credit card transactions, is providing a new funding alternative to entrepreneurs who have previously been turned away by banks. Because it is able to get actual sales information, it can approve funding immediately, and allow for flexible repayment options based on sales cycles of the particular businesses it is funding.

“This creates significant opportunity for small business owners to focus on their business and grow volumes or look for expansion opportunities rather than spend their time frantically trying to repay debt or keep the business alive after debt repayments have eaten away at any cash reserves they might have had.”

Retail Capital funding is repaid by it taking a percentage of a business’s recorded credit or debit card sales, with repayments fluctuating in line with their business cycle. This has the effect of ensuring that it isn’t overburdened with debt.

“In the past six years since starting the business, small businesses have had the benefit of R1 billion in funding they would have been unable to get through traditional channels,”says Westvig.

Against the backdrop of recessionary conditions in South Africa, Retail Capital’s client information reveals growth in informal sector turnover across a number of industries.

“We believe that growth in the informal sector is outstripping that of the formal sector,”says Westvig.

As a large proportion of the businesses it funds are women- and black-owned, there is evidence that entrepreneurs who have previously been excluded from access to finance are now enjoying success now that their access to finance problem has been solved.

Win A Business Makeover with Retail Capital

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