Fair Share

The world of business is very intriguing, sometimes confusing, and many times brings up issues that defy what appears to be common logic.

There have been several cases in which a huge company is sold for one US Dollar just so that the shareholders can be rid of the enterprise that is laced with problems of labour and liability.

The media has often reported instances of ‘hostile takeovers’ in which outside parties buy enough shares to take control of a company and finally drive the business in a direction that they see fit.

It is not unusual for banks and other financial institutions to provide venture capital to a company and thereby take a share in the business for a period of time after which the financier pulls out with a profit by selling shares back to the remaining shareholders.

During times of economic crisis, several countries have experienced situations where businesses have borrowed from the banks and because of rapid foreign exchange appreciation or depreciation, the borrower either puts the business into irrecoverable debt, or makes a hefty unexpected profit respectively.

When things go well for any business the shareholders can simply smile and grow their business as opportunities open up for them.

On the other hand, when things go wrong or the expectations are not realized, then many businesses either re-structure and re-focus, or they go belly up.

In recent months we have seen several prominent businesses go through the grueling and agonizing twists of facing the choices of re-engineering the business model or sinking to a grinding halt.

The mining sector has experienced these difficulties, the airline sector has also not been spared, and many manufacturing and trading enterprises have been challenged by the simple ‘swim or sink’ options.

Some businesses have survived by changing the way they operate, others by changing the range of goods and services, and yet others have opted for an injection of venture capital or equity partners.

Many of these choices require the shareholders and owners to bite the bullet, push ego aside, and do what has to be done for the sake of keeping the business afloat.

Privately owned companies have transformed themselves into corporations with new equity partners that own more than half the company because of the cash injection that they have put in. The company becomes stronger, more productive, and even the minority shareholder original owner finds her/himself financially much better off than before. This supports the old saying that ’10 percent of something is better than 100 percent of nothing’.

Developing countries often try to attract foreign joint venture partners to bring large capital into their businesses. The irony is that the small business owner of 20 employees’ demands to head and run the larger joint venture business that now employs 200 employees. The foreign business partner is injecting a huge amount of money into the joint venture, has more experience and skills in international marketing, has more export experience, already employs a large complement of workers in her/his head office overseas, and has obviously managed colossal sums of money in previous investments. The final result in such a situation is that the joint venture partner backs off, or the partnership goes through many difficulties as the management tries to do miracles. In the above case the norm is for the joint venture to fail and each partner goes their separate ways.

The question businesses must address is that of ‘A Fair Share’. All investors needs to ask themselves that question and answer it to themselves in as truthfully a manner as possible. What is my value in this business and how can I quantify and justify it? Where is my business going at present and where can it go with an injection of capital or expertise? How much time do I have to make things work before my enthusiasm runs out or I burn out? What is the impact of new and emerging technologies on my business? These are some pertinent questions for any business person to ask themselves as they develop a strategy for making the business more successful.

Sometimes the basic logic of ‘It’s my business’, ‘I founded the company’, ‘I am Zambian’, ‘It’s my country’, ‘I am younger and stronger’, ‘I am older and wiser’, ‘I have the money’, ‘I have the ideas’, ‘I have the know how’, are not enough to make the business a success.

The business world has become much more sophisticated over the years and some seemingly illogical ideas and strategies can produce the best results.

A case in point is a large and well established household goods shop that has been around since the 1960’s and primarily focused on the logical issues of cutting down on shoplifting theft by employing an army of shop assistants that followed customers along every isle of the shop floor. The business soon became stagnant and business topped quite quickly with an eventual impact of negative growth over the last 15 years. The owners have worked themselves to the bone without ever achieving their dream of success. Not far from this business another newly established company offering similar products focused on customer care and satisfaction, and used technology to monitor theft thereby allowing shoppers to freely and happily wander around the shop without harassment. This new business which is barely 10 years old is flourishing and expanding very rapidly. The shareholders are scattered across the world and what the shop turns over in one day is equivalent to the whole month’s business for the nearly 50 year old counter part.

As more and more Zambians consider going into business or look to expand their existing companies, it important to think about what constitutes a ‘Fair Share’. The Fair Share is what it takes to make the business run profitably and sustainably. The Fair Share is what will grow the business to offer a bigger share to all the shareholders. A Fair Share is sometimes visible as in the case of a monetary investment, but in many cases it is invisible and intangible as it represents several important but non financial inputs that transform a limping company into a vibrant and profitable business.

Published 17 February 2009