 | Not logged in | Click to login | 
|
|
Powered By: Crafty Syntax |
 |  |
 |  |
|
|
||||||
|
|
|
||||||
|
|
||||||
|
 |
 |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Posted: 2010-02-05 / Author: Bob Power Don’t Go Into Business Wearing Rose Tinted SpectaclesIt must be emphasised that buying a business can be very stressful, notably pressure on the family and financial constraints. Moving from being an employee to an employer is a big void, and becoming the boss scares many employees from taking this route. You are now in control of the business so must accept the risks and liabilities of the business, but if you get it right you reap the rewards, but if you get it wrong you can end up with major problems. The good news is that many successful business owners have failed in their first endeavors into business, but learn from this experience and second or third time round achieve their objectives.The well known financier Warren Buffet has stressed that going into business is akin to marriage, and his words of wisdom are “Don’t rush into marriage, take your time”. Good advice when entering business, perhaps “Don’t rush in where angels fear to tread” is also relevant. Bearing these points in mind, the following factors must be considered when buying and owning your own business, and are often some of the reasons for business failure, if they are ignored: •Not understanding the business that you are entering, walk away if in doubt. You must understand the product/service of the business as well as the legal entity being used for the business such as a close corporation. •Watch the jargon and legalese used by lawyers-if you don’t understand get clarification. Legalese being defined as “Words or phrases used by professional people which the man in the street does not understand” DONT SIGN DOCUMENTS YOU DO NOT UNDERSTAND-LET THE SIGNER BEWARE. •The four essential requirements necessary for success centre around, having: adequate capital, necessary business knowledge, sufficient resources and sound management skills. •Not being assessed, through an evaluation process to satisfy yourself that you have the right mental approach and aptitude to enter business-Be honest with yourself. •Paying too much for the business, by not getting advice on how to value a business. What is a business worth?-Answer-what a buyer is prepared to pay for it and the seller is prepared to accept. •Not understanding that the seller will tell you the truth, the whole truth and anything but truth. He will dress up the business to hide vital flaws in the business-LET THE BUYER BEWARE. Do your homework and check out the business carefully, with the help of professional advisers, if necessary (however carefully read later comments on negotiating with professional advisers-importantly knowing what you are getting, when and for how much). •Not carrying out a proper due diligence investigation to ascertain why the business is really for sale. You must do your homework to understand what you are really buying. A seller will state that he has the best business in town, so-WHY SELL THE GOOSE WHICH LAYS THE GOLDEN EGG-DIG DEEP? •Not giving recognition to the concepts-cash is king, information is power, profit is sanity, turnover is vanity and the spoken word is cheap-GET ANYTHING AGREED PUT INTO WRITING AND SIGNED OFF BY BOTH PARTIES AS SOON AS POSSIBLE. •Ascertaining when you enter business who the competition is, and how long have they been in existence, preferably look for a niche market •Regrettably at the present time a knowledge of security is a necessity, there has been a substantial increase in crime in small businesses in recent times. You have a legal obligation to protect your staff. •It is a reality that many owners of small businesses, are guilty of some form of crime, such as tax-VAT evasion, using the business credit card for personal use, over charging for fees etc. IS IT WORTH IT-SLEEP EASIER AT NIGHT TIME. See later chapter on bad habits by the business owner. Perhaps the best phrase to be offered is “Be honest with yourself, honest with others and not afraid to speak your mind. •You can make or lose a lot of money depending on your negotiation skills. You negotiate everything (Let the seller put his price on the table first). If you are not prepared you could get bulldozed into matters you had no intention of conceding. WHATEVER THE SELLER WANTS THE BUYER WANTS THE OPPOSITE. •From a financial perspective it is necessary to: * know how to earn money, to cost products, to prepare budgets, to control spending, to manage income, expenses and profit. * keep to the business plan, understanding the difference between income and cash flow, picking up warning signals from cash flow and having adequate insurance. In simple terms more most come in than goes out. •If profits/dividends don’t cover loan repayments-YOU ARE IN TROUBLE. •Not getting advice when needed from professionals-could be PENNY WISE AND POUND FOOLISH. •Cultural differences-especially BEE partnerships. Bearing the above overview in mind, one needs to know how to enter business successfully and then how to stay in business, manage and succeed-future chapters will give this continued advice. There is no doubt that the rewards for running a business can be great, and far better than achieved as an employee. However, you must really know the risks you are taking. An important reward is that if you prudently build up a business, its value will grow and eventually you will be able to sell at a good price, and with more experience you can move into a bigger business. Alternatively, you will be better geared to expand your existing business. You may think you are the boss, but so does the bank manager who has lent you money, who is right? Also clients have a control over you. Without clients you have not business. Above all else you are controlling your own destiny notwithstanding the risks and challenges which may arise-your financial and lifestyle goals will be achieved if you get it right. Bob Power www.powercorporateconsultants.co.za Top of page | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
 |
