Our approach Last update 2 months ago
Our 4-pillar approach is based on practised and successful business principles:
PILLAR 1: Cash
Component 1: Predicting Cash Flow:
If there is one sure way to stop a business in its tracks, it’s running out of cash. At Alpha Gold this is a key element of business management and means that getting a handle on this right at the start is a must. Predicting cash flow – through preparing a cash flow projection – is the number one control mechanism to managing cash in any business and thus managing the business success.
As a business owner, you need financial skilled staff that will make this a top priority. It’s absolutely fundamental to providing visibility over where the business’s cash is arriving from and what payment commitments can be expected in the future.
A key component of cashflow management is ensuring that there are no surprises. It’s all about predictability, which is where an experienced finance professional from Alpha Gold can add significant insight into your business. The process itself of preparing a cashflow will allow you as the business owner, in conjunction with your Chief Financial Officer or senior Financial Manager, to identify future opportunities within the business and leaves you with sufficient time to make arrangements to mitigate any cash shortfalls.
Component 2: Manage Working Capital:
How your business manages its working capital is the most important determinant of whether a business generates or absorbs cash in carrying out its day to day activities. Poor working capital management is the single largest contributing factor to business failures in South Africa.
Managing your working capital is an integral part of your cash flow predictions, but it’s the part you can control. Working capital can be loosely defined as the amount of money you require to run your business through the sales cycle, from receipt of order to receipt of payment from your customer, including the processes of acquiring stock and paying suppliers. An experienced finance professional from Alpha Gold can help you minimise the cash trapped within your working capital cycle and freeing up your cash resources to be used more effectively, preventing your business from being starved for cash.
So whilst the bottom line is vital, proactive working capital management is critical to the long term success of a business. However many business owners fail to understand the underlying fundamentals, or put aside the time to actively manage this critical business component. At Alpha Gold our finance professionals have the experience and capabilities to manage the cash flows of a business, identify opportunities for working capital improvement and support the growth of our clients.
Component 3: Lender Relationships
Building a great relationship with your bank has become a challenge post the financial crisis of 2008. Many business owners tell of a lack of understanding, coupled with a lack of decision making capability in front line staff. Added to this is the often complicated and intricate process involved in requesting any form of banking facility that leaves most clients feeling drained of energy and determined never to repeat the experience.
Building strong long term relationships at the correct levels within the banking fraternity is critical to successfully navigating the sea of banking. Having the ability to negotiate favourable and acceptable terms makes an experienced finance professional from Alpha Gold a core member of your management team. Our finance professionals have all developed solid relationships with various banks through many years and are able to undertake this critical activity with you, helping and guiding you through the process.
Added to this is the benefit of our finance professionals providing an independent financial perspective that often gives bankers and other debt providers an added level of confidence in financial projections and other management information that is required.
PILLAR 2: Profit
Component 1: Grow top line
Increasing sales is directly linked to primarily three key components. The first is the number of customers you have, the second the average amount or size of each sale that customers make and the third is the number of times a customer purchases from you. Focusing on each and all of these components will ultimately result in a growth in the top line of your business.
However one of the greatest challenges facing businesses today as mentioned before is cash flow. Not understanding the levers of sales growth and the impact these have on working capital can have a disastrous impact on a business. Known commonly as over trading, this occurs when a business’s sales growth exceeds the businesses cash generating capacity.
At Alpha Gold, our experienced finance professionals know the signs of over trading and the solutions that can be employed to ensure that great top line growth doesn’t cripple your business.
Component 2: Cut costs
When predicting one’s cash flow, a clear indicator often emerges – the need to spend less. This overspending often exhibits itself in scenarios such as staffing brought in for a long completed project, expenses associated with incorrect information and data such as cyclical data that is incorrectly interpreted as the new level of success or simply expenses incurred to accommodate the needs of certain staff members or business owners.
Simply put, sometimes it is time to change the way things are done. Expense accounts, company petrol cards and many other similar expense classes are just too excessive and may be the very cause of a business downturn. Often the decision to cut costs is left too late or the cut is not effective enough, with business owners wishing to avoid the pain often associated with such cuts.
An experienced finance professional from Alpha Gold will help you to firstly identify the quick wins and opportunities that generate the biggest wins that can be implemented immediately. Secondly they will help you as a business owner create an on-going cost management strategy that becomes part of your management and employee mind-set around costs, a simple “Would I spend it if this was my money?” Finally applying a control paradigm linked to solid budgeting and good business cases is critical to business success. Budgets should be based on a zero based approach to expenditure which questions each amount spent.
Experienced finance professionals from Alpha Gold will help you answer the critical question – “What costs do you have in your business that absorb cash yet don’t contribute to the bottom line profit of your organisation?”
Component 3: Understand your profit model
Profit generation is a core element to the success of any business. Knowing how your business generates profits allows you as the business owner to alter the outcome of business activities. Whilst the importance of growing the top line and managing costs cannot be ignored, it is critical to understand the nature of fixed costs and that a change in sales volumes or activities doesn’t necessarily translate into a relative change in fixed costs attributable to each sale. Thus in many instances, increasing top line and cutting certain costs may not have a directly proportional result on the bottom line profitability of your business.
As an experienced finance professional from Alpha Gold, focus on gross margins and the business’s profit model is a critical area of our service to our clients. Whether it’s a focus on the correct pricing of products, changing your mix of products and services on offer or reducing variable costs attributable to each sale through more effective procurement or discount structures with suppliers, our finance professionals will evaluate all the possibilities. Knowing your breakeven point and where your business is able to cover its fixed overheads are all critical to your business success.
PILLAR 3: Structure
Component 1: Strategy & Planning
Begin with the end in mind – an often quoted statement but one that is missed by many business owners. Strategy and planning in a financial sense is about organising the resources of your business to achieve a desired outcome in the most direct way. Key to this is the business owner having a clear sense of what needs to be achieved.
Countless studies show that businesses and individuals who take the time to plan and set goals and objectives are significantly more successful than those who leave their future to chance. Clear goals allow the setting of milestones to achieve these goals. Once milestones have been set, assessments can be undertaken to determine how the business should be structured to achieve these goals and generate the cash flows that will support the overall plan.
An experienced finance professional is well positioned to actively contribute to the business planning cycle. This process involves the setting of long term goals, the determination of short term actions to achieve these goals, the prioritisation and allocation of resources required to achieve the actions and the monitoring and review of progress towards these actions. Without experienced financial input and review, many actions will fail to deliver on their long term goals and objectives.
Component 2: Changes in Structure and Control
Most owner-managed businesses and family concerns lack formal succession planning, with many of their management team incapable of taking over the business and running it as a professionally managed concern. Added to this is the complexity that many businesses are run as lifestyle or owner dominated concerns and the challenges with structure become clear. As a successful business owner, changing the structure and control of your business as a result of a sale and change in ownership may be your dream but may well become a nightmare of issues and lost opportunities. For most business owners, changes in structure and control happen once in their lives and they lack the experience needed to gain the most from the event.
In order to ensure this doesn’t happen to your business, and to maximise the cash arising on the sale, you need to start the exit planning process in plenty of time, ideally at least two years ahead. An experienced finance professional from Alpha Gold can assist you in creating maximum value from your business, bearing in mind that there are a number of key drivers of value which include the level of past profits, future prospects for the company, the quality and completeness of information, degree of certainty of the business operations, the position of the purchaser, the number of competing bidders and finally the strategic fit with the purchaser.
Focusing on the other pillars of Business Success will also improve the overall price achieved through the maximisation of historical performance. However, much of this may be negated should you choose the incorrect business advisors to handle the complex parts of the change in control. The knowledge and experience of Alpha Gold reduces this risk considerably through the use of a known network of independent advisors and partners who have a track record of success and delivery.
Component 3: Tax and Legal Issues
Whilst South African tax legislation and Company Law may be amongst the leading on the African continent, the complexities of the legislative environment can challenge even the most knowledgeable business owner. Discovering you are exposed in terms of a tax or legislative issue is an extremely stressful and unpleasant situation. An experienced finance professional from Alpha Gold will help smooth the way in providing insight and experience across the wide range of tax issues you may experience as a business. Whilst our team may not have the knowledge to supply transaction specific expertise in all scenarios, our team draws upon a trusted network of partners to ensure that you receive the best advice at affordable rates in order to manage and mitigate the risks to which your business may be exposed.
Devising a tax strategy that compliments your business structure and long term strategy are key deliverables that you can expect from a finance professional, allowing you to navigate the world of business with ease and comfort, knowing your tax affairs are being proactively managed.
PILLAR 4: Controls
Component 1: Information and Reporting
Just as you wouldn’t drive down a dark highway at night without headlights, so you shouldn’t be running your business in the dark, where you have no visibility or control of what’s happening around you. Many early stage companies see finance as merely a function that records what has been done and then have an external audit that examines the past financial performance of the business. Using the traveling analogy, one won’t close ones eyes at the start of a 600km trip, only to open them 5 hours later and hope you have arrived at your destination.
Monthly relevant information is critical to the success of any business. Being able to manage your business by exception and focus your attention on the issues that matter most is of critical importance. Running a business successfully is all about focusing on the key drivers of growth, ensuring that the majority of your business is working within your set parameters and identifying the areas of your business that require your time and attention. An experienced finance professional will assist you to install effective information and reporting systems for your business that get your business moving forward and growing.
Component 2: Processes and Control
A growing business faces many challenges, with a loss of daily operational involvement from the business owner often followed by breakdowns in general business activities. This is often referred to as a loss of control associated with the owner/manager mix and is experienced by most businesses as they grow. In order to counteract the negative effects of shifting accountabilities within a business, the process and control framework of the business needs to be robust and executable. Ensuring the right types of controls are in place is critical for the success of any business as the failure to manage resources properly often results in the loss of cash and other business assets, unhappy customers and a general failure of the businesses value proposition.
An experienced finance professional from Alpha Gold is able to create a process and control framework that is unique to your business and manages the core risks that could potentially weaken and ultimately cause the demise of the business. Key controls over cash, stock, payments and expenses are a must but there are many business specific risks that require an experienced professional to identify and then mitigate through practical and implementable controls. Controls that inhibit the ability of the business to operate are also useless and understanding this fine balance is a key attribute of members of Alpha Gold.
Component 3: Compliance and Risk Evaluation
Worldwide trends see an increase in regulatory frameworks that seek to govern and control various business activities, across a multitude of industries. Failing to understand your regulatory environment could have severe financial implications for your business. Added to this is the fact that many regulations and risks are actually financially orientated, often leaves business owners without the necessary support to address the issues and protect the business from unexpected shocks.
Issues such as Exchange control, foreign currency risk, import or export tariffs and quotes are just some of the issues that may be relevant. The ability of the business to meet global reporting standards for sustainability and quality of products may indirectly have a significant impact of the businesses ability to attract and retain clients. Understanding the risk environment, managing the compliance with both national and international regulatory bodies and ensuring this is all undertaken within a framework that ensures profitability and success for the business is a key concern for many business owners.
Alpha Gold is able to provide finance professionals that are well versed in many of the risks and regulatory frameworks that businesses face, both in the financial sphere and the associated legal frameworks, enabling them to work with the business owner to ensure compliance and manage risk.