Thursday, August 6, 2009
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Venture Capital expert Lourie Nel, co –founder of the South African Investors Network believes accountants can play a more active role in capital expansion plans for the small businesses in South Africa.
Small businesses are almost always looking for funding, whether that be start-up funding or business growth funding. With small and micro businesses comprise 95% of all South African private-sector businesses. The big question is why rely on the banks to support such a large part of the economy if they are not equipped to also provide the support and expertise needed by small businesses to start and grow successfully. This market is a real force in the economy and it increasingly needs the special care and attention from the one professional who interfaces with it the most - the accountant.
Changes in technology mean that business is more complex. Changes in the market see us straddling and global markets. Changes in social structure alert us to the need for new solutions for the 'family business'.
Then, just when we are getting used to the age of the specialist we now admit that we need to be all rounders - or at least an all rounder with connections to the specialist for second or expert opinions.
Talk to your accountant more, don't be afraid of the charges - hopefully your accountant hasn't got a minute-meter ticking anyway. The third millennia accountant knows that if they help your business grow, automatically so will theirs. They know that their relationship with you is solid, they are an integral part of your team and they can refer you to other business specialists without fear of losing you.
Small business finance is a very hot topic, especially business angel/private-investor finance.
A business angel is simply a private backer. Some are seasoned investors but many are private citizens, often a friend of the family or a member of the community, or even an accountant, who provides risk funding for new or growing businesses.
These investors come with the added bonus of skills and contacts that can accelerate the growth of a business. Given that success breeds success, to have a business angel investor involved in a small business should have exponential rewards. Although, often businesses think they only need the money.
There is no point looking for a business angel just for their money. They often reject an opportunity by saying "They just want me for my money".
Many investors are motivated to give something back to the community. It is quite usual to hear an investor say that there is a real joy and satisfaction in using their life experience to help a young business to grow and develop. For them the financial return becomes a bonus.
Although business angel investors have demonstrated their ability to manage their financial resources they also need the guiding hand of their accountant. Apart from due diligence issues an accountant can be a valuable sounding board throughout the preliminary process of investigating an investment opportunity.
In essence a business angel is a business partner. Now there are few words that evoke a more negative reaction than the two words 'business partner'. How many accountants have first-hand knowledge of a failed business partnership? But, communication breakdowns such as these happen over time not overnight. Many partnerships are thrown together by circumstance and often not formalised.
This is an emerging market for all types of business advisers; the facilitation of business partnerships between growing businesses and private investors. Increasingly so as traditional sources of funding become inaccessible.
Smart private firms will be built on powerful partnerships. Partnerships carefully crafted, where the whole is far greater than the sum of the parts, where all parties are dedicated to growth and determined to explore all possible means of achieving it. Partnerships that include the firm's accountant who will be consulted much more frequently on a wider range of issues.
A clever business angel partnership wilt call for skilfully drafted partnership agreements that document a clear understanding of each partners expectation, a mechanism for dispute resolution and a schedule for continual business plan review. Where regular reviews are conducted in conjunction with an objective third party like the firm's accountant.
Many accountants also know that if partnership agreements exist within a business partnership they are often written from a position of mistrust rather than from a position of cooperation and confidence.
Obviously an attitudinal change is required from some business advisers - both financial and legal – so that these new business partnerships work for the benefit of everyone.
Thank you for the contribution of Lourie Nel and Christine Kaine to this blog article.
This post was written by: Franklin Manuel
Franklin Manuel is a professional blogger, web designer and front end web developer. Follow him on Twitter