Saturday, July 13, 2024

Buying a Financial Services Business in South Africa

The second-largest economy in the continent, South Africa boasts one of the most sophisticated financial markets in the world, complemented with a robust regulatory system. The country is home to a number of major multinational players in the fields of industry, energy and financial services. And the best, most secure and quick way to enter this highly profitable industry is to buy an established financial business. If you are looking for the financial business for sale you can check Eli-deal services in category businesses for sale.

Finding an established company with consistent revenue, employees in place and profitability may be the easiest way to go into business for yourself. No need to start from scratch. The prospective advantages are attractive to lenders as they are to become owners, who therefore often secure loans on better terms than competitors starting a business from scratch. However, it depends on buying a well-managed, profitable business for the right price – and the requisite personal qualities are significant drivers of success too.

Getting qualified

The set of skills, experience, and qualifications necessary to succeed in this sector are contingent on the type of business and the expected position of the purchaser – whether a person intends to be a hands-on operator or a passive investor. Almost all industries related to handling or advising on financial transactions or decisions have one thing in common – the regulations are stringent, especially in South Africa. Given the strict rules, you need to obtain certain accreditations, qualifications, and proof of lack of a criminal record.

Being qualified doesn’t mean having a specified education, it is about having extensive experience in your field. This mainly applies to brokers and agents. If you are not qualified or lack experience in the relevant fields then you have to find someone with industry experience and partner with them. Thus, your partner will be responsible for reporting to the Financial Sector Conduct Authority (FSCA). In fact, business persons, who have taken senior commercial positions in other sectors can often succeed by sharing their outsider’s perspective.

Choosing a niche

Certainly, a niche is not just conceived overnight; it’s set and refined over time. It begins with target clients, which leads to developing a unique expertise for catering to those clients and the problems they want to solve, and that in turn leads to the development of a services portfolio and a business model to follow the clients and their needs. As services are provided, new ways to focus on the client base emerge, new expertise is acquired, the business model is further refined, and the process is iterating until a finely honed niche emerges.

For instance, financial consultancies can command high fees since their clients are usually cash-rich and willing to pay substantially for the prospect of greater returns.

The impact of technology trends is another field of investigation. When the dominance of insurance brokers got eroded by price comparison platforms, many of them have adapted their business models to continue staying on track.

Mortgages are too difficult for most house purchasers to make clear all aspects by themselves, so mortgage brokers are less impacted.

Issuance of credit to low-income people that cannot use conventional sources of borrowing, microfinance, or microcredit also remains a prospective field for innovative, socially conscious entrepreneurs.

Debt collection agencies or developers of accountancy software also represent a promising niche in the financial market.

If you lack experience in dauntingly complex, tightly regulated financial products, you may consider buying a franchise. This is an excellent choice for new players that need comprehensive training and ongoing support from head office, but start-up costs and royalty fees can put a serious damper on a franchisee’s take-home pay.

The Due Diligence and Valuation Process When Buying a Business

The next steps when acquiring a business include examining detailed information from the seller regarding the business operations and finances, also known as due diligence.

A business valuation expert can provide you with advice on whether a seller has valued their financial business with justice. The price is contingent on net profit that in its turn depends on the business’s strengths and the fortunes of the wider sector.

Once a provisional price is negotiated, you need to conduct due diligence, which involves the following information:

  • History of profits and losses; future projections;
  • Operating costs and any debts if any exist;
  • The business model
  • Compliance with financial services regulations;
  • Qualifications and experience of a team;
  • The state of any premises involved;

If the due diligence process defines any undisclosed problems, you can negotiate the price downwards, or at least request warranties and indemnities that lower the risks. However, if the seller is not open to renegotiating, or your findings are not satisfactory, you can always walk away from the deal and consider others.

The process to buy an existing financial business can be costly and exhausting. Thorough research, due diligence, and a reasonable offer are the main points that should be conducted and considered while choosing the right business.

Why choose us?

ELI Deal service provides a cost-effective route to market for business owners and a one-stop shop for aspiring business people and buyers. You can see a large list of businesses for sale in different jurisdictions, which is constantly updated with new offers. Our specialists will help you choose the best option among various businesses for sale. Feel free to contact us anytime.

We have multiple options worldwide!

Sam Allcock
Sam Allcock
Sam heads up Cheshire-based PR Fire, an online platform that has already helped over 10,000 businesses to grab widespread media coverage on their news at an extremely accessible price point.

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