“If you are miserable NOW, but not willing to change, you’ve got a problem”
One of the reasons why many people seem to be stuck in their present situation is that they are unable to face change. There is no doubt that in order to improve our circumstances, be it in our business or our personal finances, we need to make changes, and if we are unhappy doing so, we are stuck with what we’ve got.
I believe there are three main reasons why change reluctance exists
I sit on my back deck, look out at my little piece of paradise, and think how fortunate I am. Very often visitors to our place will tell us how lucky we are to have it, but I can tell you luck had nothing to do with it. In my mind, there is a great deal of difference between good luck and good fortune.
Like most things, living where we do comes at a cost. Sacrifices have been made, costs incurred, alternatives closed off, because we chose to live where we do. It comes at a cost, but is a cost we are delighted to incur. Our good fortune also comes with two hours a day commute, about 700 kilometres a week, endless hours of maintaining the property (the garden just gets bigger), no town water, few regular social excursions (it’s too far, and who wants to do even more driving), paying for garbage collection, and no Takeaway! (fish and chips get cold and soggy by the time you get them home).
So when someone tells me I’m lucky, my usual reply is “Not lucky, fortunate, and you can be too, if you want to be”. My view is that luck is something that happens to you, and is not impacted by any action or decision on your part. Good fortune is something that you can actively pursue, and you should.
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The worst storm for some time hit our place on the evening of 14th October 2014, with heavy rain, strong winds and just generally miserable conditions. It was cold also, the Blue Mountains experienced snow storms which cut the rail line in October, almost exactly a year since devastating bushfires had ravaged the area.
So I am sitting here in the dark, (thankfully my laptop still has some battery power) writing this post and musing on what it means to be ready. Where we live, not being prepared for an electricity outage such as we are experiencing now, and have since about 14 hours ago is a pretty important loss of service….
In recent years there has been much written about the need for detailed business plans, and in fact a whole industry has sprung up built on developing business plans at great expense to the business owner, who has somehow become convinced that this is an essential ingredient for success.
I was sitting in my dentist’s chair the other day, after my umpteenth visit, yet another root canal over, when he suggested I had some other problems that he needed to discuss with me. Once I had mentally checked my bank balance and contemplated another series of hours staring at his ceiling I agreed to a chat. Having explained the problem, given me a range of solutions, the likely outcomes of each, and what it might cost, I asked him the obvious question “Well, what would you do?” Now I like my dentist and he doesn’t hurt me, and his ceiling is quite interesting in its own way, but I really needed more than “I can’t decide that for you, they’re your teeth!” This got me thinking about the nature of advice and what our clients and customers expect of us.
I don’t know how many times I have had people say to me “Superannuation is a lousy investment” or “I don’t believe in Superannuation”. Statements like these come about because the person making them doesn’t really understand what superannuation is.
Simply put superannuation is not an investment at all, much less a lousy one, it is simply a tax advantaged vehicle for accumulating wealth. The government provides taxation concessions in respect of contributions to and income earned by superannuation funds, as an incentive to encourage people to set aside funds for their retirement. The hope is that if people are sufficiently encouraged to make provision for their own retirement, the government won’t have to.
All 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……
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.
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.
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.
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.
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.
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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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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Why Do We Go into business?
This is a question I ask myself often, particularly during those difficult times (and we all have them don’t we?). On reflection, I’ve actually gone into business three times, each time for different reasons, though all underpinned by my “Why”.
For most business owners the reason can boil down to four “C”s
For the first time that I can remember, the Australian Government has delivered a budget which pretty closely matched what they were saying in the lead up.
This is a tough budget as budgets in the first year of a government’s term tend to be, and particularly in an environment where the government budget is in deficit, and our nation is facing increasing levels of debt.
The Wright Stuff 