Keep it Separate, Keep it Safe

SafetyAll of us in business know that it is an activity with an inflated level of risk. There are many external factors which can impact upon the performance of the business over which we have no control. I have written elsewhere about the 4 C’s of business ownership. Control over our destiny is certainly one which is important to me, but the vagaries of being in business mean that no matter how well we structure our affairs, no matter how good we are at doing our thing, there can be no real certainty of outcome.

What we do have control over is what is happening right now, and what we are doing with the now to minimise the impacts of tomorrow. If the only plan we have is our business plan, then we are exposing our lives, and that of our families to a higher level of risk than is necessary. By taking some small steps to separate ourselves from our business, we can significantly reduce that risk.

A couple of things to think about……

  1. Pay yourself an appropriate salary

I cannot tell you how many times I have seen business owners underpay themselves. The argument (or excuse really) is that salaries are minimised for tax purposes. In reality, structure your affairs as tax efficiently as possible, pay your remuneration to whatever entity best suits you, but make sure it is ENOUGH! A good test is what would you have to pay someone to do your job. You should be able to expect that as  a minimum, then be adequately compensated for the funds you have invested in the business at a risk-exposed rate.  The return on funds can be subject to profitability, the salary for all the hours you are working should never be.

  1. Make sure you are maximising your superannuation opportunity.

By its nature superannuation investment separates a pool of assets from those employed in your business (business real property excepted). Your business ought to be able to sustain an appropriate level of superannuation contribution for you, make sure you take advantage of it. We could talk forever about superannuation, but suffice to say it is still the most tax advantaged way of accumulating wealth.

  1. Keep your personal cash and your business cash separate.

Those of us in small business have all done it, topped up the business account with our own funds when things get tight. We need to resist this urge. Your business, if it is sustainable, should not need to resort to the Bank of Owner. By setting aside funds for a potential need to provide short term funding for our businesses, we close off the ability to provide long term funding for ourselves. If funding is appropriate and necessary then make the arrangements on a business like footing with a real bank. If the bank wouldn’t lend you the money, then you really need to think about being the lender yourself. Above all resist the temptation to skip a couple of week’s wages, or superannuation or any other payments to yourself, it’s just not good business.

  1. Do something with your money

If you are paying yourself appropriately, then you ought to be able to plan what to do with your hard-earned cash the same as any employee. Set aside some as a reserve, reward yourself for the additional work and the additional risk you are taking on, and then make sure you put into place a plan to accumulate some wealth outside of your business, you will be glad one day that you did. The main thing is to do SOMETHING, rather than nothing.  Just because you are busy (and we all are) doesn’t mean you can only think about your business, there are other wealth creation strategies you know. If you need to outsource this, do so.

  1. Make sure you are covered

A business owner who doesn’t insure his inventory, his premises, his vehicle fleet, his equipment etc. is asking for trouble. I haven’t come across too many who have not dealt with these issues. What I DO see is too many business owners leaving themselves inadequately protected. Like anyone else, a business owner’s biggest asset is his means of earning an income. As an owner you can continue to pay yourself if you get sick for a time, but can your business sustain that for long? Do you need to consider the risk to the value of your business if it needed to operate for a long period without you? Have you thought about what happens if you HAVE TO sell, rather than sell when you want to? Could your significant other run your business if you weren’t around? Being in business adds a level of complexity to these issues, so make sure you are talking to someone who kows what they are talking about.Separate

As a business owner myself I came to the realisation years ago that business owners, like anyone else, have the right to expect a secure working life adequately remunerated, with the ability to set aside funds for life after business, and to adequately protect their families. If you are unable to exercise this right then you should question why you are in business. If you are able to, but haven’t, then why not?

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Now IS the right time

Time“There is no right time to do the right thing, the only time to do the right thing is now”. As a financial adviser, I don’t know how many times I have heard “This is just not a good time right now”, but if not now when? When you get back from holidays, or when you’ve paid the car off, or when the kids leave home. Most people know what is the right thing, and they know that the right time to do it is now, but they use time as the defence against making a decision. Truly successful people know what to do and just do it, the less successful know what to do and don’t.

Often this just an excuse for inactivity. In my world, ”This is not a good time” is code for “No, go away”. If someone wants me to go away, they should just tell me, because part of my role as I see it is to help people to do the things they need to do to get the results they want. If they truly want me to go away, and don’t want my help, that is their choice, and not something I can do anything about. If they do need my help, but are just reluctant to commit, then it is my responsibility to try to change their mind.

Those of us in business encounter this all the time. We as business owners also have competing demands on our time, and must decide what our priorities are. Very often we find ourselves unable to commit the head space necessary to do what we know we need to do. We also know that it is likely that the space to achieve those things we want will never appear without help, this is where outsourcing comes in. Somebody we know and trust can be engaged to sort out the necessary “stuff” so we can get on with what only we can do.

A very wise friend of mine once lamented the fact that so many business owners are unwilling to commit the time needed to save time. This might be in “proper” implementation of software, engaging bookkeeping  assistance, or hiring a cleaner. It could be undertaking training in time management, or developing better ways of doing what it is that they actually do, rather than continuing with the inefficient practices of the past. An investment in a small amount of time now can have long term benefits, and allow future time for the fun stuff, or the profitable stuff, or the stimulating stuff.

We also encounter similar responses from our customers, and those of us who are successful at what we do have found ways to overcome the “time” excuse. So what are the ways you use to remove time as a barrier to your customers reaching a decision? Once you have thophoto 3se clear in your mind it is “time” to use those techniques on yourself. If you know you need to do something, and now is the right time to do it, then get on with it, use your skills to overcome the time barrier and just do it. No time like the present” is a truism, but a very important one.

Goodness is that the time? Time to do what I know is the right thing, right now.

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A Spectator or a Competitor?

A spectator or a competitor?

A spectator or a competitor?

“The road to financial success is lined by those who were always going to, but never did”.

I love the Tour De France. Each July my bleary eyes pay tribute to long nights in front of the telly (on an exercise bike if you were wondering) watching the lycra clad heroes tooling around the French (and other) countryside, struggling through the pain and the exhaustion to reach the prize for which they have always lusted.
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