If you are the owner of a successful company, it is most unlikely that you achieved success overnight. The chances are it has taken you several years to attain your current status and a lot of blood, sweat and tears in the process. More significantly, it has also taken quite a lot of money. Like most entrepreneurs, you probably began with a good idea but lacked sufficient cash to implement it. How else to grow your fledgling business but to present a convincing plan to your bank manager and hope for a loan?
However, startup costs are just one of many reasons new companies require additional capital during the subsequent years of their growth. A cash injection may be necessary for advertising campaigns to launch a new product or service, to hire extra staff, or purchase new equipment. When sales are booming and the bottom line looks healthy, it makes sense to avoid interest payments by reinvesting some of your profits instead. Nevertheless, there may come a time when cash is scarce, and a loan is impractical, and you’re left wondering how to grow your business.
Even though your company may be profitable, there is no guarantee it will remain so. An unexpected new initiative by a competitor could play havoc with your market share. Perhaps you have reached a point where you need to expand into new markets but lack an entrée. Maybe you wish to diversify in the wake of new tech trends or are looking for a way to secure supplies vital to your continued operation. In practice, neither a lack of cash nor a reluctance to borrow needs to impede your growth plans. Selling or partnering are also effective ways to grow your business.
The decision to sell need not mean giving up control or planning your retirement. Depending on the negotiations and the sales agreement terms, you could continue to play an active role in a joint venture with the new owner, effectively achieving your expansion plans whilst pocketing a substantial sum of cash. On the other hand, you could also find someone to finance your expansion plans with little or no change to your managerial role. A merger could be an ideal way to raise the cash to grow your business or even launch a parallel venture while still retaining control.
That said, selling a company or finding the right partner is invariably a lengthy and exacting process, especially in light of the prevailing economic climate in South Africa. However, interest from prospective B-BBEE partners remains high and offers an ideal way to penetrate markets that would otherwise remain closed to you. The potential for new business from government tenders alone is enough to make this an option worth considering. However, while seeking a buyer or investor might be how to grow your business, finding them and negotiating the most favourable terms are tasks for a company experienced in managing mergers and acquisitions (M&A).
Deal Leaders International is a specialist sell-side M&A advisory firm with access to numerous qualified buyers and investors, both in South Africa and overseas. Give them a call to discuss how DLI’s unique and effective strategies could help you to grow your business and prosper.