Taking your business seriously the long game of value creation

Consider this scenario. You have invested ten years into building your business. It has supported your lifestyle, paid salaries, funded personal expenses and allowed you to draw dividends.

- By Rowan De Klerk | CEO | The CFO Centre South Africa | [e-mail]

Your accountant has helped you minimise tax by reducing reported profit and keeping the balance sheet light. At the time, it felt efficient and responsible. Then you decide it is time to sell, and suddenly the numbers that helped you save money now work against you.

Your profits are low on paper, the balance sheet appears weak, and a potential buyer cannot justify a premium valuation. The business may have strong potential, but without evidence of sustained and growing profitability, the value you thought you built is not reflected in the financials.

The lifestyle trap

This is a situation we see often, especially in lifestyle businesses where the focus has been on income rather than long-term value. Many owners only start thinking about valuation when they are ready to exit, instead of years earlier.

Business owners underestimate how long it takes to prepare a company for sale. In private markets, the full journey from planning to exit is measured in years, not months. Private equity investors typically aim to exit within five to seven years, and even that timeline can stretch in the South African context. If you are a 45-year-old business owner today and intend to exit by 55, waiting until year nine to start preparing is simply too late.