advice – Page 2

Ten ways to hook investors onto your big idea

Posted on June 30, 2017 by Business Partners Limited

A great many excellent business ideas never get past the spreadsheet stage and into the real world simply because entrepreneurs fail to connect to the people with enough money and risk appetite to help them implement them.

Finding the right investors and pitching your idea effectively is a business skill that can be worked on, says David Morobe, BUSINESS/PARTNERS regional general manager. He offers the following ten tips to get you started:

Get yourself connected and network. Investors are out there, and they are usually only one or two people away from those with whom you do business with anyway. Your accountant or suppliers, for example, can put you in touch with potential investors, or at least someone who knows a potential investor. Emphasize the “work” in “network” – investigate and ask for referrals.

Prepare and sharpen a concise story around your idea that contains no waffle, but only the essential elements that will interest an investor – marketability, sustainability and your own passion for the project. Your value proposition should come through succinctly – what are you offering to whom, and why will they be prepared to buy it.

Make sure that you know all the aspects of your idea, its market and industry. Investors want to know that you are experienced in the industry in which you want them to invest their money. Therefore, the more you have worked on your plan, even to the point of taking your idea to the market on a small scale, the better.

Have a detailed business plan ready. Not only will it help to give you the knowledge mentioned in the previous point, but the fact that you will immediately be able to send or present your plan if someone wants to have a closer look will help to convince potential investors of your readiness. Besides, knowing that you can back up your pitch with a plan will give you confidence.

It helps if your plan has a powerful executive summary, the written equivalent of your verbal pitch mentioned in point 2. It must encapsulate your business plan precisely, without waffle or exaggeration. Chances are that the investors whom you will be targeting have seen many business plans in their lives, and they will not bother to read further if the executive summary does not whet their appetite.

Be prepared for a face-to-face presentation, more detailed than the one in point 2, for when an investor calls you in for a follow-up meeting.

It is almost guaranteed nowadays that an investor who becomes interested in your idea will check up on you on the internet. It helps to have a good website around your idea and a strong presence on social media in which your successes are highlighted, not only in your current business but in previous ventures and jobs. Most astute investors investigate the strength of both the business idea and the prowess of the entrepreneur.

Once you’ve made contact with a potential investor, stay in touch, even if it is just by asking for advice, for example on how an investment of the kind you are looking for can best be structured.

Be open to feedback from potential investors, who would want to see that you are open-minded and adaptable. Besides, chances are that the investors you are pitching to are experienced business people themselves, and can enhance your ideas with their advice whether they decide to invest in your idea or not.

Have a realistic exit strategy for the investor, who unlike you does not necessarily want to remain in the business in the long term. The investor’s thinking is likely to be: “How do I make the best return possible on this investment?” The time frames that most investors work with are between three and seven years.

What entrepreneurs wish they’d known when they were starting out

Posted on June 30, 2017 by Webmaster

The 2016 Entrepreneur of the Year® winners discuss the advice they would share with their younger selves

In the absence of concrete guidance and mentorship, the path to becoming a successful entrepreneur can be a very lonely one. As such, this path is too often forged solely by way of trial and error – frequently involving costly mistakes and countless sacrifices along the way.

In order to make this path less formidable for ‘up-and-coming’ entrepreneurs, we sat down with the winners of the 2016 Entrepreneur of the Year® competition to discuss the advice that they would share with their younger selves.

Vanessa Jacobs of Sow Delicious® and Emerging Business Entrepreneur of the Year® says that, above all, she would remind her younger self to never trade passion for money. “If you follow the money, it will seem to elude you and leave your life empty, but if you work for the love of it, then the money will follow you instead.

“It is also important to always remain teachable and view every set-back as a gift, because at its very core lies a solution of how to use it to excel to greater heights,” she adds.

This sentiment of remaining teachable is echoed in the advice offered by the owner and founder of Khonology, Michael Roberts, Job Creator of the Year ®. “Understand economics and how the world works, but be open to views, ideas and take advice. Look for inspiration in other people’s success stories and surround yourself with positive and focused people.”

Overall Entrepreneur of the Year®, Johan Eksteen of Agricon, urges young entrepreneurs to realise that they are loose cannons – something that he says is both a good and a bad thing. “Young entrepreneurs have untapped potential as they have not yet been corrupted by the harsh realities of the economy. They dream without limits and are therefore very creative and original. In this lies the caveat that it is both a good and a bad thing to be a loose cannon.

“Many ideas are potentially great ideas, but the key is to implement these ideas in real life. If they listen too much or too often to people with experience, they may be discouraged to even try, and therefore their great innovation may go undeveloped. However, if they do not take up some mentorship and advice, they may have no clue as to how they should turn the idea into a business.”

In this sense, Eksteen points out that strong mentorship encourages and guides a young entrepreneur is important, but also highlights the risk of getting the wrong mentor. “Choosing the right mentor is crucial, as the last thing you need as a young, driven entrepreneur is a passion killer.”

Carl Pretorius, managing director of Just Trees and Medium Business Entrepreneur of the Year®, says that he found having an older mentor whom he could bounce ideas off and get advice from to be very helpful. “When I was younger, I often thought that I knew more about certain matters than I really did. I would encourage young entrepreneurs to be honest with themselves about what they know and do not know, and then get help with or learn about the latter.”

Furthermore, Eksteen says that young entrepreneurs should realise that it can take up to five years to put a solid business concept together and to start making serious money. “In this time, the entrepreneur must remember that they are not managing a ready-made concept, so it requires constant change and sharp entrepreneurial tenacity to succeed.”

Eksteen finishes off with a final piece of advice that can and should be applied at any stage along the entrepreneurial journey: “Most entrepreneurs look down at the road they are on, and forget to check the direction in which they go. So keep your one eye on the potholes and the other on the road.”

Entrepreneurs to take a step back if they are to succeed

Posted on April 12, 2017 by Webmaster

Entrepreneurs can become so immersed in their businesses that they no longer ‘see the wood from the trees’, and that the way in which they are currently operating their business, could be the downfall of their success.

This is according to Kobus Engelbrecht, spokesperson for the 2017 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS, who says that all entrepreneurs, regardless of their business cycle or success, can benefit from an outsider reviewing their business and its processes.

“A business mentor is one of the most valuable resources for any entrepreneur and business owner, yet is often the most underutilized,” says Engelbrecht.

A study1 conducted in the United States – which surveyed small business owners on the importance of mentoring – showed that of the business owners who use a mentor, 88% find their service invaluable. Furthermore, 70% of small businesses that make use of a business mentor, survive more than five years, which is double the rate of those that don’t use a business mentor.

In South Africa – where the rate of new businesses closing within five years of operation remains high – entrepreneurs should actively be seeking the advice of business mentors, says Engelbrecht.

“An external business professional, coach or mentor takes an outsider’s look into a business and critically reviews all elements of the business, and analyses where improvements can be made to maximise success. This process forces an entrepreneur to be honest about their business idea / concept and its current success, as too often, entrepreneurs become too involved in their business and lose perspective.”

Apart from using the services of a mentor – which can come at a fee depending on the agreement – there are other free avenues to explore that can force an entrepreneur to sit back and reflect on the current success of their business and its processes.

“A business competition is one platform to explore,” says Engelbrecht, “as often the judging panels include well-respected, established business professionals, who on a daily basis, engage with local businesses and the environment within which they operate.” He points to the Entrepreneur of the Year® competition as an example of what entrepreneurs can expect to take away when entering such a platform.

“During the judging process for the Entrepreneur of the Year® competition, the judges look at every aspect of the business – from its business strategy, manufacturing processes, marketing and sales plans, to its financial statements – to obtain a holistic view of how the business is running.

“The judges pose questions to the finalist entrepreneurs about their business. The line of questioning often prompts the entrepreneur to critically look at certain aspects of their business, and rethink certain processes within their business.”

2016 Entrepreneur of the Year® and MD of Agricon, Johan Eksteen, who also won the 2014 Small Business of the Year® category, explains that the feedback obtained during the judging process in 2014 enabled him to strengthen aspects within his business that he had overlooked, which ultimately aided him in strengthening his business, and clinching the overall title in 2016.

From his experience, Eksteen says the criteria for the judges was to decipher how entrepreneurial the business owner is in terms of how unique the product or service was, as well as the business model. “It’s important to see how my business is distinguished from the other businesses that entered. Being able to test my business against other entrepreneurs in South Africa was a great learning curve for me.”

Engelbrecht stresses that although entrepreneurial competitions are a good way for business owners to start the review process, accessing the services of a mentor is strongly advisable to conduct a regular, in-depth review of their business’ overall strategy. “Not only will a mentor guarantee that no stone is left unturned in the business, thereby eliminating oversight in potentially important areas, but a mentor will also hold the entrepreneur accountable for the business’ goals – both short and long-term – thereby ensuring the business continues to thrive and grow, ” concludes Engelbrecht.

Entrepreneurs to take a step back if they are to succeed

Posted on April 3, 2017 by Webmaster

Entrepreneurs can become so immersed in their businesses that they no longer ‘see the wood from the trees’, and that the way in which they are currently operating their business, could be the downfall of their success.

This is according to Kobus Engelbrecht, spokesperson for the 2017 Entrepreneur of the Year^® competition sponsored by Sanlam and BUSINESS/PARTNERS, who says that all entrepreneurs, regardless of their business cycle or success, can benefit from an outsider reviewing their business and its processes.

“A business mentor is one of the most valuable resources for any entrepreneur and business owner, yet is often the most underutilised,” says Engelbrecht.

A study conducted in the United States – which surveyed small business owners on the importance of mentoring – showed that of the business owners who use a mentor, 88% find their service invaluable. Furthermore, 70% of small businesses that make use of a business mentor, survive more than five years, which is double the rate of those that don’t use a business mentor.

In South Africa – where the rate of new businesses closing within five years of operation remains high – entrepreneurs should actively be seeking the advice of business mentors, says Engelbrecht.

“An external business professional, coach or mentor takes an outsider’s look into a business and critically reviews all elements of the business, and analyses where improvements can be made to maximise success. This process forces an entrepreneur to be honest about their business idea/concept and its current success, as too often, entrepreneurs become too involved in their business and lose perspective.”

“A business competition is one platform to explore,” says Engelbrecht, “as often the judging panels include well-respected, established business professionals, who on a daily basis, engage with local businesses and the environment within which they operate.” He points to the Entrepreneur of the Year^® competition as an example of what entrepreneurs can expect to take away when entering such a platform.

“During the judging process for the Entrepreneur of the Year^® competition, the judges look at every aspect of the business – from its business strategy, manufacturing processes, marketing and sales plans, to its financial statements – to obtain a holistic view of how the business is running.

2016 Entrepreneur of the Year^® and MD of Agricon, Johan Eksteen, who also won the 2014 Small Business of the Year^® category, explains that the feedback obtained during the judging process in 2014 enabled him to strengthen aspects within his business that he had overlooked, which ultimately aided him in strengthening his business, and clinching the overall title in 2016.

Budget speech 101 with SA’s top entrepreneurs

Posted on February 21, 2017 by Webmaster

As South Africa gears up for the 2017 National Budget Speech in anticipation of Finance Minister Pravin Gordhan to deliver Government’s planned expenditure and focus areas for the year ahead, a few of the 2016 Entrepreneur of the Year^® competition winners shared some of their expectations for the upcoming speech.

Johan Eksteen, MD of Agricon and overall Entrepreneur of the Year^® winner said that he hopes to see tax relief for small businesses, incentives and support to increase exports and plans to promote production in order to create more jobs in South Africa. “Ultimately, local entrepreneurs need to focus on the positive outcomes of the speech in order to pin point where the opportunities lie,” he said.

Agreeing with the importance the budget speech has on small and medium enterprises (SMEs), Michael Roberts, MD of Khonology and 2016 Job Creator of the Year^®, said that the budget speech has a direct impact on small businesses as the outcomes and policy decisions will dictate yearly strategies and the ability to manage a business’ risks and position it for further growth. “The policy outcomes will also determine the tax impact on payrolls and company liabilities and I hope that policies introduced this year will reward companies for taking on additional capital to accommodate the growth of businesses within South Africa,” he added.

“Taking into account the advice of entrepreneurs, the Finance Minister might want to consider providing a further tax relief for small businesses by lowering the 28% Companies Tax rate imposed on the first R550 000 of taxable income,” says Christo Botes, spokesperson for the 2017 Entrepreneur of the Year^® competition, sponsored by Sanlam and BUSINESS/PARTNERS. “Since SMEs contribute at least 36% to national GDP in South Africa, we owe it to them to create an economic environment that stimulates growth and promotes opportunity. It is for this reason that the finance ministry would do well to consider the needs of SMEs when tabling its budget for the 2017/18 period.”

Meisie Nkosi, Small Business Entrepreneur of the Year^® and MD of Bella Bonni Guest Houses, agreed that the Budget Speech can assist a business with future planning and help predict whether the business can expand or not. “For instance, key outcomes around issues such as tax and processes to minimise red tape, can have a direct impact on the bottom line of a small business, and in turn, its growth and survival,” she explained.

She continued to say that she hopes to see revolving funds for SMEs with less red tape, an improvement on infrastructure development in energy, roads and water, as well as a tax break for SMEs.

“Improved access to finance for SMEs can be done by ensuring that funding by Development Finance Institutions such as the National Empowerment Fund is made available at an even lower cost than what is currently being provided, and, whenever possible, the expertise and experience of private sector service providers and financiers should be called upon to scale-up the provision of finance to SMEs,” adds Botes

In order to assist fellow entrepreneurs with budgeting advice for the year ahead, the 2016 Entrepreneur of the Year^® competition winners shared their top tips for small business owners for the year ahead:

Michael Roberts: “Firstly, business owners should manage their cash flow effectively and address cost containment in line with cash flow ability. Secondly, business owners need to work with capital correctly as it is the growth enabler needed within a business.”

Meisie Nkosi: “Business owners should be aware of the risks within their business, as well as budget slightly above anticipated costs to cover unforeseen spending. Budget planning should also be revisited regularly.”

Johan Eksteen: “Know your business’ figures as this will ultimately allow you to effectively measure its performance and set goals for the year ahead.”

Botes adds that while it is important for SMEs to manage their cash flow effectively, it is just as important for government and private sector procurers to pay businesses on time all the time. The Office of Chief Procurement Officer last year announced that about R100 billion was withheld from the economy because of government departments’ failure to pay on time. “It would be a great display of commitment to SMEs’ sustainability for the Minister of Finance to update South Africa on the performance of the walk-in payment call centres in the crackdown on late payments and announce further concrete plans of ensuring that government entities pay SMEs within the stipulated 30 days,” Botes concludes.

Give before you expect to receive

Posted on January 24, 2017 by Webmaster

By Jannie Rossouw

Head: Sanlam Business Market

In business the general view is that there is no such thing as a “free lunch”. This implies that, if a consumer within your target market receives something free from a business, there is always an expected quid pro quo.

If this is the conventional wisdom, the question remains as to how a business may provide value, without the potential future client experiencing it as “bribery” to buy something from the business?

Below are a few examples of value-adding that, if they are not followed up by a request to buy, may make a positive impression of your business on the client.

Illustrate your knowledge of a specific solution by demonstrating that you understand the target client’s need/challenge. Write short articles, and/or take part in radio/TV interviews where you, as the expert, give objective advice on the problem posed and also supply suitable solutions. Journalists and other media owners are always looking for subjects that people are struggling with, as well as experts that are able to address these subjects. Think, for example, of “green” solutions, the pursuit of healthier lifestyles, weight loss, how to save in challenging economic circumstances, how to start an own business, how to survive with children in their teenage years, and so forth.

Clients often do not understand their actual needs and buy services and products that seem to offer a solution to their need/challenge. Instead of simply providing a quotation on service requests, why not go that step further and determine what the most optimal solution for addressing the client’s need, would be. This might sometimes result in your business not being able to provide the optimal solution – then provide a referral.

Give free samples of your product to potential clients. They may then use the product and experience the results themselves, instead of just trusting your sales input and the endorsement of existing clients.

Become involved in matters that are of consequence to your target market. Your involvement should, however, be sincere, or you should not even consider it.

In many cases people have questions and just want to use an expert as a sounding board. I think of the advice counter at a nursery that people may contact telephonically or in person if they require advice on which chemical substance they need to treat a sick plant or shrub, or which shrubs flourish in shade. Not all businesses are necessarily suited to this type of solution, but it remains something to consider. This is another way of demonstrating your expertise.

If you succeed in establishing this added value, it may hold the following benefits for your business:

Your expertise instils respect in your target market. This subsequently creates trust in your target market that you are the right person to solve their needs/challenges.
Your credibility grows – people believe your advice and accept your guidance.
You become part of your target market’s “solution” – they see you as a “partner” in their lives.
It creates a perception of accessibility with your target market.
Applied correctly, it creates positive word of mouth for your business.

Winston Churchill was probably correct when he said the following, “We make a living by what we get; we make a life by what we give."

Find a way of sharing your unique expertise with your target market FREE OF CHARGE – in all probability your business will reap the benefits thereof in growing sales.

To support business owners with the important task of business planning, Sanlam gives you free access to the book Your Annual Business Game Plan for Success, which provides an easy and straightforward framework needed to draft a well-crafted game plan that will create the positive change and growth necessary for business success.

Go to www.sanlamgameplan.co.za to download your free copy.

Financial advice from entrepreneurs for entrepreneurs

Posted on October 24, 2016 by Webmaster

The 2016 Entrepreneur of the Year® winners share the best financial advice they have ever received.

Given the current challenging economic climate with South Africa’s GDP growth expected to remain flat at 0.1% for the year according to the International Monetary Fund (IMF), it is becoming increasingly difficult for entrepreneurs to ensure the financial sustainability of their businesses.

As there are many factors which contribute to the effective management of cash flow within a business, we asked some of the winners of the 2016 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS to provide us with the best financial advice that they have been given while growing their businesses.

“Remember that your business is a long-term investment.” Says Johan Eksteen of Agricon, 2016 Entrepreneur of the Year® winner. “Always look at the bigger picture and be aware of how any decision can impact the future. When it comes to short-term solutions, you can’t ‘buy yourself rich’, so rather focus on selling your product or service as this is a sure-fire way to generate a healthy cash flow.”

In the same breath, Meisie Nkosi of Bella Bonni Guest House and 2016 Small Business Entrepreneur of the Year® winner goes on to say that finance is the heartbeat of a business. “Keeping an eye on daily expenditure and auditing these periodically will help you manage day-to-day finances. In order to maintain a healthy profit margin, make sure you price your product or service correctly,” she adds.

“Also make sure you find the right investor,” points out Carl Pretorius of Just Trees and 2016 Medium Business Entrepreneur of the Year® winner, who says that it is important to ensure that whoever invests in your business shares your vision and expectations. “I would also advise finding an investor that is patient as things don’t always go exactly according to plan and they may need to wait for the return,” he explains.

Michael Roberts of Khonology, 2016 Job Creator of the Year winner says that when building a business, you should manage your cash flow as if your life depends on it, because your business does. “My mantra is ‘Revenue is vanity, profit sanity, and cash is reality’,’” he continues.

Vanessa Jacobs of Sow Delicious and 2016 Emerging Entrepreneur of the Year® winner shares the same sentiment as Michael and recommends running a business on a “cash” basis. “I try to use cash when it comes to making and receiving payments as I find this helps to monitor cash flow and make better decisions for my business while ensuring steady growth,” she concludes.

2016’s top SA entrepreneur revealed

Posted on September 1, 2016 by Webmaster

South Africa’s premier annual entrepreneurial platform, Entrepreneur of the Year^® competition sponsored by Sanlam and BUSINESS/PARTNERS, has named second-time finalist and owner of Agricon, Johan Eksteen, as this year’s overall competition winner at the awards ceremony held in Johannesburg this morning.

Internationally acclaimed Agricon is a manufacturer of cost-effective, eco-friendly pelleting solutions for the agricultural and industrial industries. The company was established in 1993 by brothers Andre and Johan, with Johan becoming the sole owner in 2006 and subsequently growing the business to a global specialist.

With over 15 years of experience in the agriculture industry, Eksteen gained a wealth of knowledge and expertise in pelletizing by working in countries such as South Africa, Uganda, Australia, Singapore and New Caledonia.

Pelletizing, involving the processing of materials into small dry pellets, is a common practice in industrial procedures. This process is used globally by manufacturers of animal feed or recycling facilities that specialise in processing materials for reuse, Agricon offering extends to rooibos tea and tobacco dust, fertilizers, animal manure and even chemicals.

Since being named a finalist in the 2014 competition, Agricon has not only expanded and experienced rapid growth in turnover, but has also benefited from the improvement of various business processes – something that stood out to the judging panel. “Johan has managed to take a small business to heights that go beyond what could have been expected by continually improving Agricon’s service offering. This is greater than just generating tangible results from a good business model – this is entrepreneurial passion.”

In addition to the manufacturing of pelletizing machines and equipment, the company provides training and on-site installation for clients, as well as on-going support following a sale, such as the provision of spare parts. Agricon also provides advice on new venture creation and business opportunities for clients within the pelleting sector, and supports the customer from business plan through the financing process and later trade-in assistance and expansion possibilities.

On winning this accolade, Eksteen believes that it will set the business apart from the rest and give it even more traction. “I feel that it is extremely important to benchmark your entrepreneurial skills against the best in business, because without testing your achievements against the realities in the market, you may easily have an inflated perception of your abilities and successes. Apart from the personal achievement and pride, winning an award of this calibre is a great feather in Agricon’s cap,” he concludes.

For more information on Agricon (Pty) Ltd, please visit www.agricon-pelleting.co.za.

Ten ways to hook investors onto your big idea

Posted on June 8, 2016 by Business Partners Limited

A great many excellent business ideas never get past the spreadsheet stage and into the real world simply because entrepreneurs fail to connect to the people with enough money and risk appetite to help them implement them.

Get yourself connected and network. Investors are out there, and they are usually only one or two people away from those with whom you do business with anyway. Your accountant or suppliers, for example, can put you in touch with potential investors, or at least someone who knows a potential investor. Emphasize the “work” in “network” – investigate and ask for referrals.
Prepare and sharpen a concise story around your idea that contains no waffle, but only the essential elements that will interest an investor – marketability, sustainability and your own passion for the project. Your value proposition should come through succinctly – what are you offering to whom, and why will they be prepared to buy it.
Make sure that you know all the aspects of your idea, its market and industry. Investors want to know that you are experienced in the industry in which you want them to invest their money. Therefore, the more you have worked on your plan, even to the point of taking your idea to the market on a small scale, the better.
Have a detailed business plan ready. Not only will it help to give you the knowledge mentioned in the previous point, but the fact that you will immediately be able to send or present your plan if someone wants to have a closer look will help to convince potential investors of your readiness. Besides, knowing that you can back up your pitch with a plan will give you confidence.
It helps if your plan has a powerful executive summary, the written equivalent of your verbal pitch mentioned in point 2. It must encapsulate your business plan precisely, without waffle or exaggeration. Chances are that the investors whom you will be targeting have seen many business plans in their lives, and they will not bother to read further if the executive summary does not whet their appetite.
Be prepared for a face-to-face presentation, more detailed than the one in point 2, for when an investor calls you in for a follow-up meeting.
It is almost guaranteed nowadays that an investor who becomes interested in your idea will check up on you on the internet. It helps to have a good website around your idea and a strong presence on social media in which your successes are highlighted, not only in your current business but in previous ventures and jobs. Most astute investors investigate the strength of both the business idea and the prowess of the entrepreneur.
Once you’ve made contact with a potential investor, stay in touch, even if it is just by asking for advice, for example on how an investment of the kind you are looking for can best be structured.
Be open to feedback from potential investors, who would want to see that you are open-minded and adaptable. Besides, chances are that the investors you are pitching to are experienced business people themselves, and can enhance your ideas with their advice whether they decide to invest in your idea or not.
Have a realistic exit strategy for the investor, who unlike you does not necessarily want to remain in the business in the long term. The investor’s thinking is likely to be: “How do I make the best return possible on this investment?” The time frames that most investors work with are between three and seven years.

Is your business continuity protected to survive a crisis?

Posted on May 11, 2016 by Sanlam

By Jannie Rossouw

Head: Sanlam Business Market

www.businessdirectory.co.za defines a crisis as: “A critical event or point of decision that, if not handled in an appropriate manner (or if not handled at all) may turn into a disaster or catastrophe.

Financial challenges in a business may come in many guises. For instance:

A big contract is suddenly cancelled.
A debtors’ book is not being managed well and bad debt skyrockets.
A piece of equipment that is crucial to your production process breaks.
A natural disaster damages or destroys your business premises.
A business partner dies or becomes disabled.

This article will focus on the impact of your death, or the death of a business partner (if applicable), on your business and your personal estate.

There are 3 key financial planning risks that every business person should address:

Taking out life insurance to cover business debt that you signed surety for in your personal capacity.
Making sure that the business is able to pay out your debit loan account (that is, your capital and time invested in the business) in the event of your death/disability.
Protecting your shareholding in the business in the event of the death/disability of one or more shareholders, by means of a buy-and-sell agreement en accompanying life insurance.

If these 3 elements are not properly addressed, the impact will be as follows:

Allegiance Risk Type Classification

Risk	Subject of the risk	Risk relevant to the applicable owner/person	Remaining owners	Business	Solution
ARTCTM 1 Exposure to 3rd Party Creditors	Suretyship that the owner signed for the business.	The creditor may call up the suretyship, exposing the estate of the owner.	If surety is called up against the estate of the deceased, it will result in a claim against the business, ultimately affecting the funding structure of the business.	Long-term and short-term funding structure may be exposed. Third-party creditors may withdraw finance or may increase cost of finance.	This risk can be addressed with a contingent liability solution.
ARTCTM 2 Unrecovered Capital	The capital, time and expertise spent on the business are the subject of the risk.	The loan account may never be recovered.	The risk of having to raise a large amount of capital to repay the loan account.	Capital structure of the business is exposed. Risk of not being able to replace the capital. Business may be sued for the loan account.	The risk can be addressed with a loan account solution.
Risk	Subject of the risk	Risk relevant to the applicable owner/person	Remaining owners	Business	Solution
ARTCTM 3 Unrealised Capital (Wealth)	The equity in the business is the subject of the risk.	The risk that the equity in the business may never be sold.	Risk of having to seek funding to purchase shares or face “foreign” partners.	Risk of foreign partners that may adversely affect the future management of the business.	This risk can be addressed with a buy and sell solution.

My advice: Obtain the advice of an accredited financial adviser if you are unsure of whether these financial planning risks have been properly addressed in your business.

You work hard to make a success of your business. Make it a priority to protect this asset and your work.