Congratulations, you've sold your business and now get to ride off into the sunset. You worked hard to build something beautiful and when the time came to hand over the reins, you were finally ready. But what comes next? What do you do when the sun rises the next day, after that sunset, and there's no ‘work’ to go to?
Cashing in your business can mean more time for gardening at home, and it can mean travelling to exotic locations. Most South Africans don't have the luxury of truly relaxing in their retirement nowadays. So in this article, we'll be providing you with some inspirational ideas on what to do next and why flipping a business could be your next smart move.
Do What You Love
Justin Nurse is the founder of Laugh it Off, a T-shirt company that gained notoriety when SABMiller sued him for trademark infringement for his controversial 'Black Labour' T-shirt that spoofed the Carling Beer brand.
Justin took his legal fight all the way to the Constitutional Court – and won on the grounds of freedom of expression in 2005. Over the years he built up his business; he had a factory in Cape Town with loads of fabric, employees, and a healthy list of retailers across the country. And when the opportunity to sell his business presented itself in 2018, Justin sold Laugh it Off.
"I'd gone from designing T-shirts and enjoying the creative process to dealing with staffing headaches and worrying about cash flow. I was fortunate to find buyers whose business strengths were my weakness (putting good production systems in place) and with the profits I bought a lodge in Bainskloof, where I now work in hospitality, enjoying a new business challenge."
The lesson here is that quite often entrepreneurs get further away from doing what they love as they build their business, preferring the 'hands-on' approach to getting something done right, by themselves, which ultimately costs them in terms of job satisfaction. When the chance does come along to change things up, what should you do next?
Pause and Reflect
Take a moment to tick off some items on your bucket list as you pursue interests and hobbies you've neglected, and perhaps travel the world. Chances are that you need some emotional distance from your old business before you plot your next move.
Even with a big payday, rushing into early retirement might not be the smartest move, considering the high cost of living for South Africans who are struggling to make ends meet with their retirement packages.
There is also the vocational ‘life purpose’ that getting up in the morning and going to work brings, especially when your work can make a positive difference in the lives of the people you interact with. This is a chance to hit ‘reset’ and align your life values with new career ambitions.
How to ‘flip’ a Business
You could also consider leveraging your entrepreneurial skills by reinvesting the proceeds from selling your old business into buying a new one. This process is called ‘flipping’ a business, and it can be lucrative if you have the right mindset and skills.
Here are the steps you'd need to take when flipping a business:
1.) Identify an opportunity
This starts with defining criteria such as industry preference, business size and location. Are you looking to cash in on your entrepreneurial experience in your previous industry, or do you have curiosity and contacts in a new growth market?
The DTIC has identified sectors in our economy with high growth potential that you can evaluate to see where there might be an overlap of your skillset and business interests. Use these while you explore business listings across South Africa to conduct thorough market research, and then hone in on more acute research on what are potentially the most profitable SA businesses. You'll soon fill your sails with ideas on how to help grow – and then flip – local businesses near you!
2.) Conduct due diligence
Considering you now know what it takes to get a business ready to be sold, you can be extra vigilant when searching for the right business to buy. You want to ask a potential seller for all their financial statements as you scrutinize their cash flow and management accounts.
Assess the business’ operations, as well as its customer base, market share, and employee performance. Use your business acumen to spot weaknesses that can be turned into opportunities as part of a thorough SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis.
3.) Acquire the business
Negotiate a purchase price that reflects a fair market value, while drawing attention to the identified weaknesses and presenting them to the seller whose time has perhaps come and is now ready to sell. Consider additional financing through a business loan or working with an investor to ensure an easier acquisition.
4.) Implement an improvement plan
The SWOT analysis you completed when assessing the financial potential of the business you wanted to buy will lay the groundwork for you to strategically allocate resources as you revise budgets and ramp up operational efficiency.
Revamp outdated marketing strategies, make necessary technological upgrades, and expand your new business's products and services as you keep an eye on the key performance indicators (KPIs) you’ve set that will measure the impact of your changes. Remember, the goal is to get in, improve and then get out.
5.) Sell the business
Find prospective buyers by marketing the business effectively, and highlighting your improvements. Keep your financial records up to date and keep your employees engaged in the process of continuous improvement.
It is this seemingly intangible momentum that will be felt by the aspirant business owners you plan on selling to, allowing you to maximize your return on your investment and cap off a successful exit.
A Flipping Successful Story
Rolling with the theme of industries and ideas to fuel your business flipping ambitions, here is a Mzansi success story that proves just what is possible:
Robin Smith is a ‘green entrepreneur’ and the Founder of Faithful to Nature, an online health shop that encourages conscious shopping at every turn with a wide range of eco-friendly products, from ethically sourced food and nutritional supplements to pet products and hair care.
"In 2006, I wanted the power to choose – so, I created Faithful to Nature to give ordinary people access to honest, affordable, and ethical alternatives that were too few and far between. We created a world-first ingredient policy in search of clean ingredient lists and products that were free from toxins. We are constantly refining our ingredient policy, growing our social impact, lessening our carbon footprint, and pushing ourselves to positively impact the landscape of conscious retail."
Robyn sold a stake in her business to Sivertree Capital in 2015 and in 2021 Faithful to Nature became a Certified B Corporation, a business vehicle that sets out to solve social and environmental problems while maintaining profitability.
Her company was the first retailer on the African continent to become BCorp Certified and proudly sits alongside other BCorp businesses such as Patagonia and The Body Shop that see business as a force for good.
While not as 'hands-on' as she was when fulfilling online orders in the early days, Robin remains involved in ensuring that Faithful to Nature remains transparent and accountable to the social and environmental performance standards set for the company by its stakeholders and BCorp certification standards.
As far as figuring out what to do when selling your business goes, creating a legacy that leaves the world in a better place is a great way to go about things! The same could be said of using your money to create a trust or foundation that ensures that the money you've earned accrues and is accessible to deserving entrepreneurs further down the line.
From business flipping to philanthropic business, there’s a world of opportunity that lies in wait when it comes time to figure out what to do after selling your business. If you need any assistance, please feel free to reach out to us.
