BUSINESS CAPITALIZATION BY SELLING PART OF IT

It is only in Uganda that one sells his land to revive his business. A business may be collapsing due to reasons the business owner may not have control. 

A business starts with the founder in a small way. It grows steadily to an enterprise with several employees, bigger supply contracts and increased revenues and expenses. This goes on with the hard work of the business owner but without the slightest idea that he also has to grow in business management. 

Because the business owner did not invest in the development of his business management skills the business started to stagnate and even decline in revenues while expenses rose. This is the point in the business lifecycle that the owner must realize that his capacities in terms of business management and technical skills, finances and connections to suppliers, markets etc. have been exhausted and therefore new inputs are needed.

In Uganda that is the time the business owner will start selling his tangible assets to capitalize on the business that is stagnating or declining. If this indicator is identified, my advice to the business owner is to look within himself and look for any of the above-mentioned capacities that need strengthening. 

The capacity of lacking skills in business and technical management requires the business owner to let go of the professional positions by recruiting professionals on merit so that he can concentrate on supervision. But he must also invest in himself by studying some business management supervision skills to enable him to perform. For finances, the entrepreneur may have to bring onboard investors i.e. sell part of his company to other like-minded entrepreneurs willing to grow the business. 

So, selling off your tangible assets to capitalize on the business is not a solution to the business stagnation or decline but instead, bringing on board more capacities of the above-mentioned issues.

  

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MAKE SELLING YOUR BUSINESS EASY WITH THESE EIGHT STEPS.

COVID has caused a massive disruption in business sales. Most people are sitting and waiting for the results of what the coronavirus will have on their business. Businesses that have not been affected by the virus are still selling but just at slower rates. Businesses impaired by the virus people have been taken off the market.

You have been building to sell the business that you’ve put a lot of time, effort, and equity into growing, and now you’re looking to sell. Your objective is to get maximum value when selling and you’re assessing steps to prepare for the sale. You are trying to get the maximum price for selling your business, getting the best terms finding the right buyer or looking for the best broker to sell your business.

1. Determine what your business is worth

A business is generally worth a multiple of its profit. Depending on the size of the deal that can be 2-10 times profit. Smaller deals generally average 2-3 times profit (deals under UGX30m in price) medium deals 3-5 (deals UGX30m to 200m) and large deals 5-10 times profit (UGX200m and over)

2. Prepare your financials with your accountant

Because a business is valued on its profit then good financials are required. Preparing an adjusted profit and loss statement is required to present to buyers.

3. Find a broker 

Depending on the size of your deal and whether you have an unsolicited offer on the table, most companies will garner a higher valuation when sold using a broker.

4. Develop the executive summary of your business

This is the document that outlines what the business is, financials and frequently asked questions to help the buyer make an offer.

5. Put your business on the market

Market your business to buyers looking to acquire a company.

6. Get offers from potential buyers

Receive offers from buyers and negotiate the best one.

7. Let the buyer perform due diligence

Buyers generally get 60-120 days to verify the financials and validate they are getting what they are paying for.

8. Close the deal

Time to celebrate! Sign the final contracts and the handover process starts.

TEN STEPS TO BUYING A GOING CONCERN BUSINESS

1. Identify the industry you want to be in

Step one of business acquisition is defining the type of enterprise you're looking for. This will begin with a general decision of which industry to move into. You’ll need to research the mid-to-long-term prospects of the sector before moving forward. Pay specific attention to legal concerns, changes in regulations, and look at local competition within the industry.

2. Target the business for acquisition

With broad marketplace knowledge now at your disposal, the next logical move is to target a suitable, specific business. Have in mind an ideal budget, size, location and annual turnover and, most importantly - whether you feel you can make a success of it. Now to find one which matches these expectations. Think about businesses that are not actively seeking a buyer, as well as those advertised for sale. Every enterprise has its price, and tabling an unsolicited offer may convince the owners that the time is right to sell.

3. Research

Before you bring in the experts you can undertake a little investigating of your own. Pose as a customer to experience the service first-hand, whilst also working with the company to look through its finances. This position of trust and privilege cannot be abused, and you will most likely need to sign a confidentiality agreement or none disclosure agreement before you can get access to sensitive company data.

4. Open negotiations

At this point in the acquisition, you will have a more detailed picture of both the target business and the industry within which it operates. With your clearer understanding of its business activities, you can begin to talk directly to the current owners and work together to build a deal that will satisfy all parties.

5. Evaluate the enterprise

The valuation stage of buying a business is perhaps the most vital to ensuring a successful purchase.

The approach you use will differ depending on the type of concern that you are buying. Assets will often make up the bulk of any valuation: value from property and real estate to machinery and equipment. 

However, whilst these can be relatively easy to appraise, you shouldn't overlook the importance of turnover, profitability, and ongoing contracts as a way of informing your offer.

6. The Heads of Agreement

The Heads of Agreement, though not a legally binding document, is nevertheless an important and useful stage in the negotiations process. It essentially condenses the key elements of a sale into a single document.

Payment, responsibilities, periods of confidentiality will all be set down in the heads of agreement at a point in the negotiations when each party is still free to walk away from the proceedings.

Most importantly, the Heads of Agreement will act as a timetable towards completion: explaining to each party the time-scale and deadlines for every step of the deal, from financing to the release of payments.

7. Due diligence

By this point in the buying process, you will be intimately familiar with all aspects of the sale and you should have a detailed understanding of how the rest of the process should unfold.

Having already undertaken your own, informal due diligence in the early stages of the purchase, you can now look to bring in the professionals, who will offer a more thorough analysis of the target business' accounts, practices and day-to-day operations.

Although you don’t want to take risks by cutting costs at this important stage, remember to stay in budget and keep your outgoings to a sensible ratio of the overall purchase: you do not want to be spending tens of thousands on accountants and lawyers for a firm worth only a hundred thousand.

8. The Sale and Purchase Agreement

The completion of your sale and purchase agreement will mark the closing stage of the acquisition process.

Whereas the Heads of Agreement sets out in broad, non-legally binding terms an overview of the purchase, your Sale and Purchase agreement will give both parties their legal obligations for the sale.

9. Pay

You will have a different set of options for paying for your new acquisition, depending on the size and scale of your purchase.

A larger business of multinational interests may involve complex financing from multiple sources. For a smaller scale buy-out, the most common method is a straightforward payment on completion agreement. Financing can come from private means, angel investors, banks, loans companies, or peer-to-peer lending platforms.

Sometimes, the current owners may relinquish full control of their business at sale, but take only a percentage of the full value on completion, in return for ongoing shares in company profits.

10. Completion

With the final documents completed, contracts signed and payment agreement in place, you have completed your newest business acquisition.

Although this ten step process may at times seem slow and the workload overwhelming, everything will fall into place with time. Even the hardest negotiations can find a positive resolution.

SAVING IS NOT INVESTING

Saving and investing often are used interchangeably, but there is a difference.

Saving is setting aside the money you don’t spend now for emergencies or for a future purchase. It’s money you want to be able to access quickly, with little or no risk, and with the least amount of taxes. Financial institutions offer a number of different savings options. 

Investing is buying assets such as stocks, bonds, mutual funds, or real estate with the expectation that your investment will make money for you. Investments usually are selected to achieve long-term goals. Generally speaking, investments can be categorized as income investments or growth investments. 

Poor people see money as money to trade for something they want right now. Rich people see every money as a ‘seed’ that can be planted to earn and then replanted to earn a thousand more. 

When you listen to the news and hear reports that the stock market had a great day, do you find yourself wishing you were investing? If so, you’re probably not alone. Sometimes one feels like he should be investing, but is intimidated. What one doesn’t realize is that he is well on his way to growing his wealth because he already is saving on his own and he is taking steps to learn about investing. 

If you deposited 2,000,000/= in a savings account at 3 percent annual interest, it would grow to 3,641,510/= in 20 years (before taxes). The same 2,000,000/= if invested in a business with an average 18 percent margin a year would grow to 71,265,631/= in 20 years (before taxes).

Making a choice between either saving or investing will depend on your goal(s) for the money and your risk tolerance.

How Investments Beat Inflation?

When it comes to building wealth, time is much more powerful than the amount you invest or even the returns you earn. But it also matters where you put your money. Assuming money is set aside in a savings account at a local bank that pays a 6 percent interest rate. Because of inflation, the same amount of money you save today will lose value in the future. Even though you put away money on a regular basis, to beat inflation by keeping it in a local bank’s low-interest savings account.

Inflation and the Time Value of Money

If you have the basic idea of inflation — that 1,000,000/= today probably will not buy the same amount of goods that 1,000,000/= will buy next year — and you are not sure how investing will help. Investing takes advantage of compound interest over time, so the more time you invest — in general — the more opportunity your money has to grow.

SMALL OFFICE HOME OFFICE (SOHO) AT POST COVID19

With the COVID19 gone and business is back up and running in the streets of major towns in Uganda, a lot of changes will take place and one of them is working from home or limitation in movement.
Many Ugandans during the quarantine and lockdown tasted the home office and they think that is one method of work they can explore since the one or so months has yielded the same results and at a reduced cost.

SOHO is an acronym for Small Office Home Office, a term used to distinguish small businesses from mid-sized and large businesses. Technically, SOHO businesses have zero to ten employees, although many of them are one-person shops.
Information technology is a typical SOHO example that includes writers, web/graphic designers, software developers, systems analysts, etc. who can work remotely via the internet
Construction people who work on a contract basis in the construction industry such as plumbers, electricians, carpenters, tilers, masons, etc. who can carry most of the tools of the trade-in trucks or vans and don't need an office
Professional, Scientific, and Technical Services are SOHO examples and include consultants/specialists in various industries including accountants, lawyers, engineers, and everyone who works in a small office, whether as employer or employee.
SOHO businesses have increased the world over with the advent of technologies such as cloud computing and mobile devices that allow home workers to access business information over the internet from home.

Many professionals, including lawyers, travel agents, accountants, and financial advisors, may start operating as a SOHO business. New types of businesses based entirely on the Small Office Home Office model, such as Virtual Assistants, will also be created.
SOHO businesses will increase steadily as the increasing number of corporate businesses embrace telecommuting.

The Need to Operate SOHOs
The main reason why people may want to work from home or in small offices after the COVID19 Pandemic is the freedom they get from:

Reduced commuting: - People who operate SOHO businesses generally don't have to spend hours commuting to work every day. In addition to not spending time in traffic, there are savings in a vehicle or public transportation costs as well as reduced expenses on dry cleaning, child care, etc. There is also a reduced effect on the environment from vehicle emissions.

More family time: - Working from home or in a small office allows people to spend more time with their families, and friends. A home office arrangement is particularly advantageous for stay-at-home moms, given the flexibility in the hours of work.

Less distraction and reduced stress: - Working in a busy office can be very stressful, especially since most large companies have long since abandoned the concept of individual offices for employees and have embraced the cubicle concept, which due to the small workspace, and lack of privacy many people find confining and depressing. Noisy offices can be very distracting for people who need to focus on tasks with minimal interruption.

Comfort: - Working from home is much more comfortable than working in a corporate office. If you decide you want to get up and work in your housecoat or pajamas all morning you can. In your own home or private office, you have the freedom to set up your office environment exactly the way you want.

Being your own boss: - Working from home gives you a certain level of independence, even if you are an employee. If you want to catch up on social media during the business day you can do so without feeling like someone is looking over your shoulder.

Improved health and well-being: - Those who work in a small office/home office have a better work/life balance and are often happier and more productive than those who toil in a corporate office all day. Reduced stress, increased flexibility, and more time for family, friends, and exercise contribute to a healthier lifestyle.

Cost-saving: - However, running your business as a SOHO can also involve considerable cost savings as well from office space rent, stationery, transport, office logistics, furniture, non-essential staff, etc.

BUSINESS OPPORTUNITIES AFTER THE COVID19 PANDEMIC

A lot of business opportunities are expected to come up after the COVID19 Pandemic has been controlled and these are expected globally. In Africa, we have always not been prepared for any opportunities after calamities just because we mourn longer and forget that in every problem there is a hidden opportunity.
Opportunities we have envisaged to grow are more in the service and production sectors as highlighted below:

1. Online shopping and delivery of goods from those in supermarkets to those in food markets
2. Transport and logistics of procured merchandise to the consumers
   
3. Psychosocial Support due to the many changes that are coming with this new situation like people who are losing jobs, the stress of home working, etc.
4. Internet Service Provision for Home Office and Education since these are going to be the new trends to enable cut costs
5. Sanitizer and Face masks Production are objects that we are going to live with to avoid any other similar attacks
6. Health Beverage Production seemed to control and increase the immune systems of Africans
7. Spirits and Gin Production will increase as an additive to the sanitizers gel, solutions, and the wipes
8. Computers and Communication Equipment Trading and production is going to increase to cater to the demand of the home and education use
9. Organic food Production will increase since many of the developed countries have high demand and yet it here in Africa that we can abundantly produce it
10. Health and Medical Services
11. Pharmaceuticals Production
12. Office and Home Cleaning
13. Occupational Health and Safety at home and workplaces will be needed due to the change in our work methods and environment
14. Power and Energy Production is crucial because of the increased usage of E-commerce

With any opportunities that come there are also threats that come along which must be dealt with to avoid economic distortions. Threats we envisage to encounter in the post-COVID19 Pandemic are:

1. The collapse of the infant real estate sector especially middle-income residential
   
2. Reduced usage of Public Transport because of home office and layoffs of support staff
3. Reduced renting of office space and shop space for those that have opted for internet use
4. Reduced social and nightlife in bars and clubs with government restrictions
5. Reduction in production and sell of building materials due to the collapse of the real estate
6. Reduction in the tourism and hospitality sector because of reduced travel since many organizations are opting for E-commerce
   

This, therefore, calls for orienting your entrepreneurial mindset from businesses that work in the Pre COVID19 to businesses that will work in the times ahead.