Blogs

Rewarding Challenges in an SME Business

• Jan 12, 2018

As baby boomers look to step back or exit their businesses there are great opportunities for talented individuals to take a different path with an equity position in a small business. There are of course pros and cons of taking this path and ultimately it comes down to the risk profile of the individual.

A corporate career can offer protection through a consistent salary and benefits regardless of market conditions. Salaries are also generally higher than in an SME business. For many, it also brings job security however even that’s not guaranteed in our changing world. If you are looking for a change here are some reasons why you might consider taking an equity position in a smaller business, over a corporate career.

A smaller business over a corporate can give you:

• More opportunities to make a real difference
• Genuine strategic decision-making opportunities
• A change from having to sell concepts up the chain of command before implementing
• Satisfaction that you are building up your asset
• Greater financial benefits through dividends and an eventual sell down

There are numerous business broker websites that list companies for sale and this can often be the first step. The challenge however is many of the smaller businesses you can afford will essentially only provide you with a salary and you are effectively buying a job. The larger businesses where you can add value often require a large capital outlay on the day you take over.

A less known option is to take part in a gradual buy-in with a business owner who is looking to step back over time. This can allow you to get into a business of greater scale than you could afford to buy outright. In this situation, business owners are looking for talented people who can bring the knowledge they have gained into the corporate world and help grow a smaller business. As part of an agreed plan, equity is transacted over time and in some cases, your equity can be fully or partially funded through dividends. The business owner also benefits from the business growth.

Be brave and take the challenge!

Mike Warmington is a Director of Platform 1 NZ Ltd who specialise in using executive search techniques to find people with capability and equity for SME business owners wanting to transition.  

www.platform1.co.nz