When Zambia offered its parastatal companies for sale, there were a number of responses from within and outside the country. Many people who responded merely saw an opportunity but had no capacity to manage such businesses. The buyers who weathered the storm and transformed such corporations into profit making organizations had been in the same business at the time of expressing interest. In other words, even in mergers and acquisitions, corporate entities that seek to exploit a new opportunity will have been in that business for some time.
Like eagles, the South African new buyers placed themselves on a search for anything to literally grab. In other words, they did not purchase our hotels, manufacturing companies or copper mines simply because they saw an advert by the Zambia Privatization Agency. They were in that business already or had been planning to get in the given businesses. Those that had not anticipated or planned for such opportunities ended up very badly.
First, they had no experience to manage the businesses. Second, they were not financially ready to run the operations. Third, they lacked knowledge of the cultural dynamics of the business. What they had thought were a pot of diamonds ended up being a heap of garbage. Fourth, the investment process melted under the heat of emerging shocks that had not been anticipated. This is because when you jump on an opportunity for the fear of losing it, you will ignore fundamental questions about the business.
My experience in this area is that most people who buy assets or businesses with insufficient preparation always experience the “lead time crisis.” The concept of lead time has been discussed in previous articles but refers to managing the process from beginning to end without any lapses in time. A lot of critical elements are overlooked and become the cancer that tear the business apart.
By the time you realize your assumptions were exaggerated, you will have drowned under the pressure of foreclosure threats and liquidity challenges. You may get the business but not be able to develop relevant market networks. Running a business is often much more complicated than the appetite for it. Certainly, when you are hungry, you may think you can eat the entire elephant alone! But the initial bite will begin to slow down your appetite for food in response to the metabolism in the body.
An opportunity must be planned for. Those who succeed in buying new assets and turn them round for profit anticipate and plan for them. They plan every acquisition. Some have short, medium and long term acquisition plans. For every action they take, they have strong financial back up. They know how much they already make in the existing business and plan to put some money aside for new acquisitions. They also have strong relationships with banks. The relationship between banks and clients can be like a lion and an impala. But if your business is well planned and all intentions and vision collaborated with the banks’ objectives, the relationship can be like a hen and its eggs. One incubates the other for the creation of real value.
Businesses expand and grow under circumstances of good planning. A Japanese proverb that goes, “when you are thirsty, it is too late to dig a well” aptly explains the need for planning! Always anticipate new demand, new opportunities at any given moment. Wherever there is a goal, money is found. It does not happen the other way round. If an opportunity comes and you find yourself not ready for it for lack of money, let it pass. Only exploit those opportunities you plan for. And planning also involves strategically putting money aside.
A Japanese proverb that goes, “when you are thirsty, it is too late to dig a well” aptly explains the need for planning!
For every opportunity that comes before us, we should assess our levels of competence and experience to manage it. The best strategy for the successful management of opportunities we possess is to have an appetite for risk. Those who know value will always find it!