In our last episode of Food For Mzansi TV, we spoke to Nico Groenewald, the head of agribusiness at Standard Bank, about business succession, and he briefly touched on a business’s lifecycle. Today, he will dive much deeper into getting to know your business structure, and how that can take you from good to great.
What is business structure?
Let’s start with the basics. First off, Groenewald emphasises the importance of knowing the link between your business’s lifecycle and its structure. When thinking about your business structure, you have to look at it from two different angles: knowing the hierarchy of your business, and what type of business entity you have incorporated into your farming venture.
- Hierarchy: Do you have a clear idea of who reports to who in your business, and knowing where responsibility and accountability lies? This is one of the most important things to be aware of when thinking about your business structure.
- Business entities: If you’ve just started your farming venture, you will most probably start out as a sole proprietor, but as time goes on and your business grows, you will begin incorporating different entities into your business. These entities would be things like trusts, other companies, partnerships and joint ventures, who all now have a stake in your business’s success (to find out why this is so crucial to your business structure, watch this episode of Food For Mzansi TV).
Do financiers actually care about the structure of my business?
YES! Financiers need to know where your business is in its lifecycle and having a clear outline of your business structure is crucial for them to gett the insights they need. Commercial agriculture relies especially heavily on a strong business structure, because it is so capital intensive. Capital goods often need financing, and when banks look at which ventures to finance, they usually keep the five Cs in mind: Character, Capacity, Conditions, Capital and Collateral (Groenewald gives a great breakdown of these characteristics in today’s episode of Food For Mzansi TV, so don’t miss it).
Don’t forget that if you’re a farmer, you’re an entrepreneur at heart, and if you want to grow your business, you need capital. So, when applying for financing, make sure that your business structure is set up for success.