February 2020 - BAY OF PLENTY BUSINESS NEWS

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14 BAY OF PLENTY BUSINESS NEWS February 2020 Fancy a piece of the pie? Last month I talked about why a business owner might consider bringing on a minority shareholder with a view to eventually having them take over. This month I consider things from the perspective of the buyer. I am seeing more businesses that are offering employees a slice of the business and the employee wanting advice on whether they should buy in. So, from the perspective of the buyer, here are a few advantages and disadvantages to employees taking a share in a business. BETTER BUSINESS BUYING > BY TOM BESWICK Director at Ingham Mora Chartered Accountants in Tauranga, is a business advisor who specialises in buying and selling businesses. He can be contacted on 027-5744- 019 or tom@inghammora.co.nz Benefits of buying into a business A key first benefit to becoming a shareholder employee (as opposed to any other investment) is the potential for favourable vendor finance terms. This could mean that the employee might not have to put any money down to get the shares. This can mean that employees who otherwise would not have the means to be a shareholder can afford to be. There are many ways to structure how the employee might eventually pay the shares off. A second benefit is the value of buying into a successful business. Some staff come to me saying they have been offered 10 percent of the business and need to decide whether to do the deal or go out on their own. Of course, there are many factors to consider in order to answer this question – but clearly it may be better to buy into a successful existing business then it is to start your own one. The statistics for how many new businesses fail within five years are quite grim. Thirdly, buying a small share in a business could be a pathway to full ownership. Lots of employees could never afford to buy the business from their boss outright. However, if they were buying it at 10-20 percent a year then this becomes a viable option. Not only does the employee eventually get to buy a business they could not have afforded under this option – they have been building the business the whole time they have been a minority owner. This is likely to make the transition to a new owner more stable – as compared to an outright sale. Some of the downsides Agreeing on the value can be tricky. I have seen several examples where an employee has been offered 10 percent of the business – at 10 percent of the business’ value. Unfortunately (for a business owner) the 10 percent is worth proportionality less as it has less control. If the majority shareholders want to do something – they do it. The 10 percent owner gets dragged along for the ride. It can be hard for a business owner to stomach a discount of potentially up to half the value of the shares given the lack of control and marketability. Of course, price is just one aspect of the negotiation – but is important for potential new shareholder employees to understand what their potential investment is worth. Another downside to taking a minority shareholding in a business is going to be the business partner. No matter how well you get on, once there are two or more shareholders involved there is some risk that everything gets a bit more complicated. Many businesses have systems that need strengthening when unrelated shareholders enter the picture. For example, in your own business you can take out cash whenever you like. But if you keep doing that after bringing in a 10 percent shareholder you could have a problem. A third downside to buying a small shareholding is that as a shareholder you are tied to the history of that company. It is important that you do your homework to make sure you are comfortable with that history and there are no skeletons in the closet that will reduce the value of your investment. Buying into the business you are working in could be a great option – particularly for those with insufficient assets to consider an outright purchase. If you are ever offered a piece of the pie, make sure you get great advice before you bite in. SELLING YOUR BUSINESS IS A ONCE IN A LIFETIME VOYAGE THE MOST IMPORTANT FINANCIAL DECISION A BUSINESS OWNER WILL EVER MAKE. ENSURE IT’S ALL PLAIN SAILING FROM HERE As a busy business owner, you may not have had time to consider what will happen when you want to exit your business. That’s where Tabak can help. A successful sale and smooth transition out of business ownership depends on achieving a clear understanding of market conditions and the potential sale value of your business. Our team of business brokers are experts in guiding business owners through this process. So if you are looking for expert, tailored advice on how to prepare your business for sale we want to hear from you. Contact us today! 203503AA tauranga@tabak.co.nz 07 578 6329 www.tabak.co.nz Tabak Limited. Licensed REA (2008)
February 2020 BAY OF PLENTY BUSINESS NEWS 15 Plastic planet – The Pacific’s seventh continent Areas of plastic pollution accumulation are as vast as continents throughout the oceans of the world and the largest is in our Pacific Ocean. Known as the 7th continent, it is nearly six times the size of France (3.4 million sq km). Artwork by Lianne Edwards, courtesy of the artist and Whitespace, Auckland. While new legislation is rolled out condemning single-use plastic bags at our supermarkets, recycling in NZ is still limited, with mega-tonnes going into landfills in our already glutted and geographically limited land. Recycling will form a big part of the gallery’s education programme this year and will consider the health of our environment, and specifically the need to care for our oceans and waterways. For decades, artists around the world have created work to draw attention to our interdependence with the environment. Land Art became one of the hallmarks of the 1970s, taking work out of the commodity-driven gallery system into the environment with figures such as Alice Aycock, Robert Smithson and Michael Heizer. Curating Aniwaniwa by artists Brett Graham and Rachael Rakena for the 2007 Venice Biennale was as much about promoting artists from Aotearoa and their epic magnum opus, as it was to raise awareness of cultural submersion and rising sea levels in the Pacific. But increasingly refugees are finding themselves forced to leave their submerged islands to settle in New Zealand. Venice is slowly sinking, while the bush fires raging in Australia have heightened the global focus on climate change and its effects. Gallery emphasis on recycling ARTS AND CULTURE > BY ALICE HUTCHINSON Alice Hutchison is the director of the Tauranga Art Gallery. She can be reached on director@artgallery.org.nz. Land Art became one of the hallmarks of the 1970s, taking work out of the commodity-driven gallery system into the environment.” As freshwater sources are drying up internationally with the ever-increasing climate emergency, glaciers disappearing, our precious water is being sold to offshore companies. There is ample room for innovative recycling and avoiding certain plastics and making conscious choices – and certainly educating our younger generations eager to find ways of creating sustainability for their futures. The marine environment in which we live, Tauranga Moana, is a precious and delicate environment, which saw New Zealand’s most catastrophic marine disaster 10 years ago with the sinking of the Rena. The massive amounts of toxic waste that spilled into the ocean rendered Papamoa beach a vast black oil slick destroying ocean habitats and killing thousands of birds. The impact has been particularly egregious for local iwi and residents of Mōtītī island. The series of exhibitions and public programmes the Tauranga Art Gallery is augmenting through 2020 delves into artists and the oceans, partnering with the University of Waikato. It also includes histories of navigation, referenced in Matatoki – Mata ā Waka, bringing precious taonga out of storage from the Tauranga Heritage Collection, and a partnership with The Elms in conjunction with a number of Aotearoa’s leading carvers. Edwards’ exhibition addresses plastic impact Lianne Edwards, an artist who has a background in marine science, conservation and resource management will present her first public gallery exhibition. Using found material garnered from the oceans, Edwards specifically addresses the “plastic diet” of sea-life; fish, birds and plankton – becoming an inextricable part of the food chain. Her exhibition will feature a selection of work melding art, science, and repurposed, discarded materials from the Pacific Ocean, articulating the “Beauty and chaos, transience and permanence” of nature and “its mindless destruction by humankind.” Edwards’ artworks comment on our relationship with, and how we treat and value, the natural world. Growing up in New Zealand, her strong connection to the Pacific region surrounded by the Pacific Ocean is made tangible through repurposing flotsam and jetsam, plastic rubbish, and the ill-fated creatures, such as swordfish, which make up her found materials from the ocean. Microscopically delicate or commanding a strong physical presence as in the Wayfinding series of Sentinels and Sea Kraits, environmental messages and important themes are addressed in the artist’s concern for our oceans, our native plants and animals “and the future that we will be leaving for generations to come.” Edwards has collaborated with organisations such as the Sea Cleaners initiative, and also with wildlife scientists to draw attention to our marine environment and with our critically endangered native bird populations. Her work is in the collections of Auckland Art Gallery Toi o Tāmaki, Chartwell Collection, Ministry of Foreign Affairs, Wallace Arts Trust and many private and public collections.
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