Grow & Exit

If you reflect on what you have built so far. A simple business, focused on solving problems for a few well-defined customer segments and retaining them by creating a great experience delivered reliably and consistently. You have a few growth strategies maturing all the time, and they are all now led and run by your team. You have time on your hands. Apply it to focusing on deepening and locking in your value.

The starting point here is to understand the basic premise of value investing. If you are investing in a share on a stock exchange, you want three outcomes:

1. Income – your annual dividends. 
2. Capital – you want the capital value of the share to grow over time so you can sell it for more than you bought it.
3. Tradability – you want to be able to sell and buy the share as you like

Value is all about behaving as a shareholder or investor in your own business. Looking at your business like you look at a share is how you lock the value into your business.

In this Podcast of the Money Show Pavlo Phitidis unpacks the final layer in building a 100million valuation company: [VALUE]

The fourth layer is all about growth.

With your time now split to only 30% on operational and management activities because of the first 3 layers, you have time to focus and lead growth. There are several different types of growth you must generate to both lift revenues and deepen profit, and one without the other is of little value.

Growing revenue is about increasing your company’s revenue, while growing profit is about increasing your company’s profitability as a percentage of your revenue. In effect, you want to increase the “gap” between your revenue and your costs to increase profitability while also increasing the quantum of revenue to increase profit.

The first three layers see you with a company that serves well-defined customer segments whose ideal customer experience you’ve determined in the Positioning layer, which is then built out in the System of Delivery layer and brought to life in the Purposeful People layer.

Locking in capital

Achieving this needs you to lock in the growth and future profits of your business. Depending on what business you are in, this can be achieved across multiple areas.

1. Brand – A brand is a feeling that your stakeholders have towards hearing your company name. What you do for who, how you do it and why you do it carry all the building blocks of a brand beyond pretty logos and business cards. It’s hard to get right and costly too if you cannot answer these questions with a vision for yourself and your business. A brand is lived before it is felt and it must transcend your business into the industry and sectors you work in.
2. Suppliers – any dependencies on suppliers must be locked in, contractually or otherwise. If you represent a brand in your territory, that contract must ensure longevity and cession. If you run a restaurant, you must have a long-term tenancy, etc.
3. Customers—to what degree can you provide a service (and every business is a service business) over the long term for your customers? If you can move towards providing a service over time as opposed to a single project, that secures long-term customers. There are many ways to get this right. Think of a motor plan as an example.
4. Team—how do you lock in your team as the drivers of your business.

Across all these areas, you need to ensure that you, your role, and your presence are minimised.

Ensuring tradability

Understanding the 5 levers of valuation and exit is key for any business owner. Not knowing them means you may well build a business that does well for you over 10–20–40 years but cannot be sold or transferred when you want to exit. You’ll have earned a good income, but the capital gain will be lost, robbing you of monetising the years of investment and risk it took to get here.

Let’s end off by behaving as the buyer of your business. The promise was to create a business worth 100 million.

20 years in, you should be owning a material portion of your market. This could be as much as 2-3% in the service industry. In manufacturing, this should be around 3-5%. It varies from industry to industry, but you need to have a view on it, and you need to be in a position where you are generating at least 10-12 million in profit. After 20 years, this should be possible… right?

Valuation works as a multiple of profit. In general, multiples start at around 2-3 and move up to 5-6.

So, let’s make a deal. The 5 levers are a set of questions that cover the following areas:

1. What distinguishes you in the eyes of your customers?
2. How is the business operated and run?
3. Who makes it all happen?
4. Is there future growth?
5. What happens without you there?

An Asset of Value™ is a business that answers them all. Each layer plays into the next as they couple together and demonstrate that each of these question sets can be addressed in a manner that earns an additional 5 multiples on the running industry multiple.

On a 10 million profit, a 5 multiple earns an additional 5 multiples to give you your 100 million asset.

Jack was 54 years old when he came to Aurik, he had 76 employees at the time and his revenue was $4,89 million per annum.

He was also exhausted.

Jack ran multiple, disconnected businesses. one supplied baked goods to hotel chains, another was a retail coffee shop, he also had a few bakeries which he ran, and he bulk broke flour to distribute to smaller bakers around him. The business was extremely chaotic, and Jack wanted to sell it, but who would buy his problems?

Working with Aurik, Jack identified 1 business and closed the rest, together we developed Systems of Delivery, empowered by a team, to dominate that chosen sector.

The System of delivery released his time to focus on new market segments and innovation to enable next-level growth.

Jack’s  annual revenues increased 10-fold and his business was valued at $77,2 million after working with Aurik.

 In addition, Jack no longer wanted to sell as he business was fun and exciting again –

Watch this video summary of Jack’s story

During WWII, the British government used a series of slogans to manage the public mindset, the most enduring of which is “Keep Calm and Carry On.” It lives on in memes, coasters, fridge magnets, t-shirts, bumper stickers, and mugs. It was a slogan used to manage fear and an attempt to maintain a mindset of EGBOK (everything will be okay) amid deep uncertainty.

Uncertainty is back, and the world of NICE (no inflation, constant expansion) enjoyed over the last decade in many economies has ended.

Rising inflation and interest rates; an unstable currency; the seemingly unstoppable march of energy costs; and the almost certain probability that the unemployment rate will begin to rise all contribute to an alarming increase in the cost of living. Exacerbating and feeding more uncertainty are the impacts being felt by climate change, global conflict, and trade barriers while still trying to recover from the COVID supply chain disruptions, the isolation of remote work, online fatigue, and eyewatering levels of national debt. These and a litany of other local and regional grumblings can collectively disassemble any sane, rational person.

Exasperated, we turn to our politicians and leaders, demanding that they “fix” everything. They did promise a better life for everyone! Well, we all know how that has worked out. When there are no cogent answers to complicated problems, slogans become the mantra governing life for many again. Keep Calm and Carry On, put one foot in front of the other, keep your head down and quietly hope and pray that EGBOK. Embrace a life of austerity nostalgia—that is what it asks you!

It all stinks of resignation. It breeds apathy. It stunts growth. It makes you poorer. It erodes your independence and confidence. It seeds negativity, discontent, and blame. It begs you to be content with weekend muddles in the woods with your trusty labradoodle, Rusty! It works for the government that holds no practical answers to private business owners’ economy. It also works for your competitors, so long as they don’t get duped into embracing it.

The antidote is to live and lead with a growth mindset.

A growth mindset embraces the environment for what it is but directs energy and effort only to what you have control over. It allows your actions to be led by your vision for your company and yourself as a business leader. It wears a lens of opportunity, recognising that uncertainty changes the status quo and cracks open new opportunities. It acts, despite uncertainty, and embraces failure as a teacher, not a measure of who you are. In times like these, competitors will hesitate to invest in the changes needed to adjust to the changing circumstances of their customers until certainty begins to calm the stormy seas of the economy.

And whilst they do as they are told and “Keep Calm and Carry On”, you will be eating their lunch!

Written Pavlo Phitidis, Aurik Co Founder & CEO.

To recap, for the last few weeks, we’ve been talking about how to build a 100 million company.

There are five layers that a business owner needs to build to ensure that you can support your company valuation. How you act and direct your team across each layer changes over four stages of growth, from start-up to scale-up, ramp-up, and value-up.

The first layer is about positioning—it answers the question “what makes your business special in your customers’ experience”.

The second layer is the delivery system, which is all about designing processes, activities, and systems based on the experiences your customers want.

The third layer is about getting the right people to do the right thing at the right time and at the right price.

In this podcast of the Money Show, Pavlo Phitidis unpacks the fourth layer in “Building a R100m valuation company” [GROWTH]

The fourth layer is all about growth.

With your time now split to only 30% on operational and management activities because of the first 3 layers, you have time to focus and lead growth. There are several different types of growth you must generate to both lift revenues and deepen profit, and one without the other is of little value.

Growing revenue is about increasing your company’s revenue, while growing profit is about increasing your company’s profitability as a percentage of your revenue. In effect, you want to increase the “gap” between your revenue and your costs to increase profitability while also increasing the quantum of revenue to increase profit.

The first three layers see you with a company that serves well-defined customer segments whose ideal customer experience you’ve determined in the Positioning layer, which is then built out in the System of Delivery layer and brought to life in the Purposeful People layer.

Accelerated Growth

Your job now is to accelerate your growth with your current services and offerings by leveraging these 3 layers to dominate in your segments. Doing so increases your market share in each of the segments you have chosen to dominate and increases your ease of finding, winning, and holding clients through referrals or word-of-mouth and brand familiarity. If you maintain your first 3 layers and don’t veer from the simplicity of the business model they offer, increased revenues will be serviced by an experienced and well-capacitated System of Delivery and team. Put differently, the same cost base of your business will generate increased revenues, widening the gap that drives your profitability. It will also mean that your team can drive this growth, releasing your time to focus on next-level growth.

Next Level Growth

This is growth that generates a significant impact on your profitability with little impact on your service or delivery costs. It’s also vital to diversify your company’s risk to create sustainability and increase your valuation multiples. Getting this right must again be done without disrupting your first 3 layers too much. Too much disruption or completely disassembling those layers will pull you directly back into your company’s engine room and the daily, weekly, or monthly grind of operational and administrative activities.

To get it right, use the time you have released to find new customers in different industries or sectors. By this, I mean customers who have the same problems that need solving and that your products and services can solve much like they do for your current customer segments. Then evaluate the similarity of the experiences that those customers want in order to support you. Their ideal experience must be as close as possible to the current experience you generate for your current customer segments. Again, this means that there is as little disruption to your first three layers as possible.

The result will be an entirely new seam and stream of revenue from the new customer segment in the new industry, served off the back of an experienced, capable, and moderately increased cost base. A significant jump in revenue, with much of it flowing down to your EBITDA or post-tax profits. Achieving this with little disruption to your first three layers means that your team can lead it and, again, release your time to focus on capital growth.

Capital Growth

This is about locking in your future revenues and further deepening your profits. It is essential if you wish to secure a clean future exit at a premium valuation. Your focus here is on productivity, efficiency, and technology. Productivity is typically calculated as revenue per employee. Efficiency is calculated as time/activity, and technology is measured by automation—in your business or in your client’s business, which you have put in place.

Productivity gains are gotten through working with your team. Identifying process-driven activities and the ‘gaps’ between your business systems that compromise coordination (For example, lead generation not handing over effectively to lead conversion) is the low hanging fruit. Business systems need constant attention and development!

Efficiency comes into play when you identify with your team how you can enjoy more value for the same cost of an activity or engagement, or alternatively, the same value for a lower cost. Often, gains are found in your business systems that can be optimised and integrated more effectively.

Technology gains can see many productivity and efficiency gains automated inside your business. Outside your business, you see technology innovate and advance the capability of your service or product. For example, I.O.T, A.I., ML, additive printing, and many more technologies available invite significant gains in value to your customers and clients. Instead of running an in-person sales team, create a virtual showroom and offer sales calls digitally, weekly rather than six times a week in person.

Leading this aspect of your business evolves over time.

Starting up—growth is focused on transaction volume and velocity of clients until you identify how to position your company 

Scaling up – growth must be generated organically as a result of this stage, freeing up your time to focus on the next stage.

Ramping up—accelerated growth is the order of the day.

Value optimization –  next-level and capital growth should take up 70% of your time during this phase.

Getting growth right needs the first three layers in place. After that, it needs a vision, targets, and discipline – don’t get distracted!

To recap, over the next few weeks, we are talking about how to build a 100m company.

There are five layers that a business owner needs to build to ensure that you can support your company valuation. How you act and direct your team across each layer changes over four stages of growth, from start-up to scale-up, ramp-up, and value-up.

The first layer is about positioning—it answers the question “what makes your business special in your customers’ experience”.

The second layer is the delivery system, which is all about designing processes, activities, and systems based on the experiences your customers want.

The third layer is about getting the right people to do the right thing at the right time every time and at the right price.

Building and growing a business towards a 100 million valuation 20 years down the road is simply impossible without a high-performance team.  It’s simple logic. Without a capable team, it’s just you doing everything and holding everything together. This makes your business a job and, at best, you might attract a small buyer for a small price who wants that life.

In this podcast of the Money Show, Pavlo Phitidis unpacks the third layer in “Building a 100m valuation company” [Securing a purposeful team]

Getting the right people

Recruiting the right people is the first challenge. You need to know what talent you want, why you want it, and where to find it. Broad job descriptions based on functional roles doesn’t work, you need to think about hiring in terms of performance. If you are looking for a salesperson, how do you specify the talent and skill sets you need? Good salespeople have similar attributes, skills, and experience. Yet, of the many you’ve hired, most have probably not stuck around, leaving at great cost to your business. Rather, recruit against a system that you want that person to operate, innovate, and manage. It’s far easier to recruit against a set of activities than a set of CV of bullet-pointed attributes.

Doing the right thing

Once on board, getting that person to be able and capable fast is the next challenge. How do you train and then performance manage that person if the job description is shaped as a broad function, like sales? Simply performance managing against targets that a salesperson must deliver, for example, 5 new customers a month, is sure to fail. A sales system includes valuable content and activities to enable a salesperson’s success. For example, who are your customers? How do they buy your products/services? What are their key motivators and concerns? How do you resolve objections? Organizing activities that generate a measured outcome into a sequence allows you to measure performance more closely and usefully.

Arguably, one of the biggest challenges in a business is deciding how to delegate effectively. Delegating responsibilities to a team member only to have to do it, check it, confirm it and so on defeats the purpose. Delegate a system, not instructions. This is the key to unlocking delegation success and performance.

At the right price.

Despite the fact that education, skills, and knowledge are widely available, finding the right talent as you grow and are under pressure might make you think that big, hefty degrees and a weekend course at Harvard require you to pay big salaries. As private businesses, we cannot compete with corporates on salary and must build our businesses more smartly as a result. The key here is the system you employ to perform that function. Again, if it’s built to the specifications of your customer experience, you can afford to get a person with less experience and no Harvard degree to run it and grow from there.

Leading this element of your business changes over time too.

Starting up—get a team on board that is inspired by your vision and wants to be part of the future. The more cross-sectional their appetite to learn, do and help, the better, since in the beginning, you need a jack of all trades.

Scaling up: Specialize your team into functional areas of marketing, sales, operations, and so on. Working with them, build the business systems in a manner that has them co-creating the systems with you. It makes people feel valued, accountable and it automatically sets the standard and bar as to how they need to perform.

Ramping up – get your team to build capacity within each of their functional areas. As leaders, they need to be more strategic and have their underlying team do, so that they can lead the constant improvement of each functional system and coordinate between them.

Value up – lock your key team into the future of the business. Any buyer who is paying a premium price for your business will want to know who is going to deliver the growth and performance in the future that you’ve enjoyed in the past when you leave. A committed, high-performing team adds a full multiple onto your valuation, adding a significant uplift on your market valuation.

The second step in building a 100 million valuation company over 20 years is ensuring that the company is built with a system of delivery.

Over the next 20 years, the company will go through 4 phases that work into each of the 5 years: Start up, Scale up, Ramp up, and Value up.

What we said is that a business that will be able to achieve this has five layers, built in sequence, one on top of the next. The first layer is positioning, and that asks: Why do you exist? What makes your business special in the eyes and experience of your customers?

Positioning is about saying, “let me not be greedy”, let me understand what industry I’m playing in. Let me look at the universe of all clients and customers that make up the industry and then let me find three or four slivers of clients who have the same problem, emerging in the same way, that my product can solve.

Instead of saying I define my business by the features of my product. Let me rather say I define my business by those three or four niche little slices of customers who are similar in their behaviour around how my product can solve their problem;  how they wish to learn about me; how they wish to be engaged with me, and when they do become customers, how they wish to be serviced by me. That is layer one – positioning .

In this podcast of the Money Show, Pavlo Phitidis unpacks the second layer of valuation in building a 100million business over 20 years;

The second layer of valuation, is about building systems, which is a process you must begin almost immediately. To give an example, Pavlo met with a business owner whose 40-year-old business  specialises in brick laying. So how does this work? The business owner organises groups of people, often referred to as gangs. These are made up of three people; two bricklayers and one individual who does all the mixing of the cement. Depending on the building site that he enters onto, he will organise a gang or three gangs or seven gangs to get the job done on time. What was so interesting about this individual?

The fascinating thing about this business is that laying a brick is not just simply laying a brick, because there are various forms of bricks and the ability to lay these bricks in a fashion that works with the architect’s vision of what the home or the building looks like is vital.

Another interesting thing is that it’s a  family business and  the father has now bought his daughter and son into the business with a view for them to take over from him. T daughter has a quantity surveying qualification and the son is learning directly from the father about the business operations. However, for the succession of this business, there need to be systems in place and the business needs to be built on a system of delivery, which is essential for the success of the business.

Like the brick layer, building a system of delivery is essential for building your business. Start by listing all the activities you perform and note them down. In the first five years of the business you’ll be working on getting those lists right. Start with  how you market your business to your customers, how, when they engage with you, you take them through a process of building their confidence that you can deliver the work. That’s what selling is. And when they eventually come on board, what is that process? What are the activities? What are the checklists that you need to build to make sure that you deliver the service as you promised? It takes five years to get those checklists right. And that is the first five years of the start-up period in building your system of delivery.

Once you have got those lists in play, you are a quarter of the way there. At that point in time, you’re now getting money in consistently because you’ve positioned your business smartly and successfully. You are now finding yourself working 15 hours a day because it’s you who is managing all the activities in the business.

And from there, you move to the next phase, which is where you scale up. Scaling up is where you  identify those individuals in your team who’ve got potential and you give them those checklists showing how they must go about marketing the business, how they must go about signing and securing clients, and how they must go about delivering the service to those clients.

The checklists help to gain measured outcomes and are very useful in the early stages of effective delegation. To get that right takes time, because most of us in business think that we are delegating by issuing instructions to our team to get the job done. Effective delegation needs to be how you get the job done rather than just get the job done. And how you get the job done is going to be specified in those activities that make up the Systems. When you get to a point where you’re really gunning it in the market and getting a great response, those good customer experiences that you want to consistently deliver are supported by systems that your team runs and operates. Whether it’s one, two, three, five, fifteen, twenty or more Without those systems to deliver, bad customer experiences quickly erode the five, ten, fifteen, and twenty years of  effort, risk, and love that you’ve put into your business

 I’d like to talk about how to build a 100m company.

There are 5 parts to this process, which we share as a 5 part series

Each piece will look at the 5 layers of value a business owner needs to build across and through their company. We will also look at these layers across 4 stages over time. Each stage takes around 3-5 years, depending on your skills, history and experience, relationships, and access to funding.

The layers include:

Positioning – to compete and win

Building a System of Delivery

Securing a Purposeful Team

Securing next-level-growth

Value – ensuring you have a transferable, premium asset

Across each layer, the 4 lifecycle stages include:

Starting up, Scaling up, Ramping up, Value up.

It is all about starting with the end in mind—why do you do what you do and the difference between a Job and Asset. We will cover that.

This article unpacks layer 1 – Positioning. How do you start, scale up, ramp up and secure your value through positioning and how does it affect valuation and saleability?

You can listen to the discussion from The Money Show or read on.

Positioning

This is all about how you set yourself apart in the crowded, noisy, competitive market. It is all about how you define your business and purpose. It is all about how you find, win, and hold customers, and it is all about why you exist!

Getting it right takes time and getting it wrong leaves you stuck in a world of operational noise and slog.

So, let’s get it right by looking at why we get it wrong first.

In 1774, we learned from Emerson that success comes from “building a better mousetrap.” He was right because very few products worked and functioned like they ought to, and it was all about winning on the back of a good product.

Then, in the late 19^th century, Taylorism came about. It culminated in Ford claiming that you could have any Model T you wanted for so long as it was black. This was all about winning on price, and the production line came about to make that happen.

Then, in the late fifties, Herman Kotler, arguably the doyen of advertising and marketing, said it was all about segments. The theory was that birds of a feather stick together and understanding which birds you serve best would allow you to find and reach them more effectively. You would have seen the early stages of this industry emerge in the series ‘MadMen’.

Today, everyone in business has all three criteria in play – a good product or service, a competitive price, and an effort to market them to a segment of people they believe will buy them.

MBA completed. So why does it not work?

Ask yourself, “Why does my business exist?”

The purpose of any business is to solve a problem for a customer. If you cannot name the problem you solve, you will fail in your business.

Naming the problem is not enough. Understanding how the problem comes about, the cost of the problem, and ensuring that you, through your products and services, can solve the problem at a lower cost than the problem itself is a start.

To get this right, you need to know whom you are solving the problem for. This is more than a segment as defined by Kotler; it is a group within a segment. For example, blue-chip corporates are a segment. Within that segment are the mining businesses. Within that segment, there are deep miners. Within that, platinum. Within that, multinationals and nationals. Within the nationals, junior miners, It is like unpacking Matryoshka Dolls. You want to get to the niche within the segment that will act, behave, engage, and think alike. That is the elixir of your business, since understanding your customers on that basis unlocks how they experience the problem you solve and how they buy and behave around getting the solution to that problem.

Leading this element of your business changes over time too.

Starting up—sell to anyone and everyone, discarding your business plan but starting with one until you understand the segment and niches within it.

Scaling up – say no to everyone and anyone outside of the niche segment that you want to become an expert at serving.

Ramping up – you are marketing and selling into that original segment and also looking for a new niche within that segment that has an almost identical experience around the problem and solution.  

Value up – lock in the niche segments you serve through increasing value for them, be it in how you reach them, serve them, and keep them This is the DNA of your business. It is why you exist. It sets you apart and distinguishes your business from your thousands of competitors. It is hard to see and copy once you get it right, adding a whole multiple to the valuation you would otherwise get.

Pavlo Phitidis introduces a 5-part series that is going to look at the five layers of valuation that need to be built in to a company for it to grow to be worth 100 million.  

The series will be based on five layers in the business, across four lifecycles of a business, and the five layers need to be reviewed and rebuilt in each stage. The four phases are:

!. A start-up business

2. You’ve found some traction in the market and want to scale up.

3. When you’ve scaled you want to ramp up revenues and deepen

4. The final act – to make sure you lock in your value, and that you, yourself are not the business.

In this podcast of The Money Show, Pavlo Phitidis precedes the five layers of valuation with a discussion of starting with the end in mind…

The first thing to do if you want to start or grow your business is to have a clear destination. Consider the reason for what you are doing and why you are doing it. It is often out of necessity, it gives you economy. It hopefully gives you purpose and  meaning. But ultimately, the purpose must be that you are building a saleable asset.

And that means that you need to understand how valuation works in any business.

When you start the business,  it is worth nothing at all. However, you still need to grasp the mechanics of value .

You then must make a commitment to decide what you are doing on a day-to-day basis. Are you  going to build a job for yourself? At a job, you are right in the middle of the business and its survival. Your team cannot function without your everyday guidance and leadership. Your customers draw heavily on you. Your suppliers draw heavily on you, and it can give you tremendous meaning, and a sense of importance and value.

But an Asset needs to have three things:

1. Income growth
2. Capital growth
3. Tradability

And the 3^rd point relies on you NOT being central to the business.

Keep an eye on our blog and newsletter where we will share this series to give insights into: Beginning, scaling up, ramping up, and finally valuing up.

Our economy is structured like a sandwich: When you look at the sandwich, it consists of two pieces of bread with a thin slice of meat in the middle. The bread is the visible bit, and you hardly see the meat. However, the protein and nutrition is found in the meat, not the bread itself, it’s what gives that meal its true energy and true value.

In this podcast from The Money Show with Pavlo Phitidis, Pavlo breaks down what it means to be the meat in Sandwich, in the economy…

How it looks from an economic point of view is that policies are made with a key focus on corporates and micro-businesses, disregarding SME sector. Let’s unpack this:

In 2017, South Africa had ,1400 businesses that had a taxable income of greater than R50 million. A tiny number. We had approximately 161,000 businesses with a taxable income (profit before tax) of between one R0 and R1 million.

We had 35,000 businesses, that did, from a taxable income point of view, R1 million to R50 million of taxable income.

The bread in the sandwich is in the corporate sphere because it is exciting for investors because in many instances these are public companies.

The smallest 161,000 businesses in the formal economy are very interesting to government because they carry a lot of voting power.

Government incentives are often structured to be easily accessible to the large corporates, particularly multinationals which are some of the biggest beneficiaries of grants in our country. An example is the automotive industry where we pay to play in order to have Mercedes and BMW and Ford and all these large brands established in South Africa on the basis that they are job generators and on the basis that they spur on an extensive supply chain.

Corporate sector executives are invited to meetings where discussions are had, settlements and deals are done, and the structure of the economy is created around what is best for corporates. In essence corporates have a louder voice when it comes to government.

And then government focusses extensively on micro enterprises because it suits government to do so in order to secure favour when elections come around.   

The same is true in most countries.

But here’s the thing: Competition is predominantly found in that mid-tier market of R1M – R50 million.

The mindset of these business is to invest relentlessly to grow your business. There are enough resources in terms of people, purpose, plant and equipment and leadership for them to compete viciously – if they don’t get the deal, there are a dozen competitors who will.

That means you have to constantly improve the value you are offering – and that happens through innovation. Innovation in itself attracts funding. Funding and innovation attract talent, which creates further innovation – and this all creates vibrancy is this segment.

We can’t escape the fact that big business has to exist, as the consumer of mid-tier services, but the more inclusive this mid-tier becomes, the better for the economy, for big business, and for government. 

This segment is the meat – this is where the economy is innovating, energised and growing – because it has to!

Business owners risk everything to sustain a business. Given what it takes to achieve this, they and their family tolerate significant sacrifices—stress, absence, missed holidays—it is an emotional roller coaster for all.

In the early days of starting your business, it is a complete hustle! The happens  because  if you want the business to survive, you have to generate revenue and capital.

Once the capital starts coming in regularly, you can re-invest that capital back into that business with strong teams and skills that will enable you to build your business into your greatest wealth generating asset. or what we call, an Asset of Value. This is a business that you will one day be sold or passed on by means of a succession to the next generation.

In this podcast with Pavlo Phitidis, Pavlo discusses outcomes and scenarios that business owners face when starting out and then building their businesses.

Inflation is creeping in and the cost of living is rising through fuel and food prices. Consistent political volatility is not making the situation any easier. All this noise creates uncertainty from an individual and a business perspective and can erode your confidence as an entrepreneur and your future endeavors.

As a business owner, you need to steer your ship in the right direction, which means being the captain who stays on the bridge with a clear view ahead.
Business owners need to adopt one strategy! And there can only be one strategy behind your business, and that is to build it into what we refer to as an Asset of Value™

In this podcast of The Money Show, Pavlo Phitidis shares insight on a strategy that all business owners should be working on.

An Asset of Value™ has 3 elements to it:

• It offers you growth in your revenue, which means income growth.
• It offers you deepening of profitability, which gives you capital growth
• It released your time to focus on Next-level growth

A business built as an Asset of Value™ will enable you to sell it and reap the capital gain as a reward for all the risk you have taken over the five, ten, fifteen, or twenty years of getting it there.

To build your business into an Asset of Value™, you need to be able to move through the storms because even as a captain of a ship, there are storms that come to pass and how you steer through them will determine the end goal of your business.

Despite the difficulties in the market, your team must be able to find confidence in you to lead them through it all.

With that note, an exercise that will lead you in the right direction would be to take a note pad and, from Monday to Friday, in different colours, write down all your tasks and separate them to see where you are spending most of your time in the business. Is it working with the team? Or micro-managing them to make sure that the business is on track?

This exercise will help you determine whether you are working on the business or for the business.

Having a vision is essential. And sticking to your strategy is essential, because if you don’t have a vision or strategy, then what are you doing? Your business should be built into a business that can one day be sold and not be part of the 94.6% of businesses that are started that never, ever get sold.

When building a business, the goal is to scale and grow and ultimately sell your business. Thus an accurate business valuation is essential.

In some cases, businesses are sold outright with everything they are built on, but in other cases, businesses are stripped and torn down simply because the buyer is only interested in one part of the business that he sees as valuable, which is not a desirable outcome for the owner because he does not receive the actual value of his business.

Listen to this podcast from The Money Show where Pavlo Phitidis discusses valuation and successfully selling your business.

A business that Aurik is currently working with was about to be acquired. However, in the acquisition, the offer they received for the company was way under what their assets were worth and their understanding of the value of the business.

There are 2 key takeaway points which could be seen as red flags in this business:

1. Even though their revenues were growing, and they were thriving through the COVID period, their profits as a percentage of revenues started to diminish. The more they grew, the more they started to erode the valuation of the business itself.
2. So as the revenues grew, what happened? The costs grew in tandem with the revenues. And when costs and revenues marry each other tightly, very little drops down to the bottom line. And the bottom line, ultimately, is what people are looking for in order to understand whether the growth that they are buying is going to be profitable or whether the growth that they are buying is going to be trouble.

For a successful business sale or exit, start at the end and imagine yourself as the buyer; this may help you with business valuation. Grasp the mechanics of business valuation and simply construct a business to demonstrate those mechanics. A few key elements to consider are:

• Determine the journey and how many years it will take you to get out of the business.
• Define the product.
• Determine brand positioning for the company in order to understand the end consumer.
• Look at your business in terms of customer groups and understand that businesses are 99% psychology and 1% product, not 99% product and 1% psychology.
• With the changing times in business and valuation, brand building is key to a good valuation for your business. A brand is your perception of a product or a company. And an experience is created, yes, in part by the product, but mostly by how that company behaves towards you. That is the key.

Build a coherent business where the sum of its parts far greater than the whole.