Constructing and operating a business of your own is no easy feat. Business owners can often get swept up amongst the excitement of the process, but if it is success that you are after, being able to maintain a healthy balance when tending to the financial health of your company is integral.
It is estimated that approximately 20% of businesses fail within their first year of operating, whilst a staggering 60% will go bust within the first three years. How do you ensure that you and your business aren’t headed in the direction of soon becoming another statistic? Having clarity regarding your direction and intentions is essential in order to reap the full benefits of owning a business. To reach this point it may be of interest to you to consider the factors that have been outlined below for your benefit.
Have a Budget in Place and Stick to it
Having a suitable budget goes hand in hand with constructing a business plan, both play key roles in business success. Whilst constructing a budget can be considered the easy step, it’s the implementation of these steps that can prove to be difficult to uphold.
By mapping out your predicted cash flow it is a measurable strategy that builds a great foundation for your business, enabling maximised levels of productivity and therefore success. This reduces the stress of managing business expenses, as you will be aware of how much money is being spent and where exactly it is going.
Accounting software like Xero, makes budgeting in real time easier, because you can budget dynamically, reviewing your income against budget as regularly as you like. Why this is important also is that while it is ideal to stick to a budget personally, a business budget needs to be more dynamic, because the needs of the business will change.
Expect The Unexpected
It is fundamental to ensure that you have a secure emergency fund. For businesses this is your business float, that allows for the ups and downs in cashflow, that businesses will inevitably experience and will prove integral when you experience circumstances you have not planned for.
Challenges will naturally be faced in and outside of your business and so it must remain a priority of yours as a business owner to protect your business by expecting the unexpected.
Related to this, we recommend that you prioritise an insurance meeting with your financial advisor to ensure you have the protection you need.
Pre-emptive Tax Management
Although taxes remain an inconvenience to most, the legal responsibility in which a business must adhere to in this regard makes them a factor that is impossible to avoid.
An adequate comprehension of the tax system is necessary, as without a firm grip on the obligations, some businesses end up inadvertently paying more or likely account for less than they should, due to limited knowledge of the system.
A tax saving avenue, which often goes undetected and under-utilised is the use of tax saving strategies and structures, one of which is a bucket company. Using your business structures as part of your personal wealth plan, can combine to be a powerful part of your retirement strategy and is an area a business focused financial planner like Yield focuses on with our clients.
Have a Thought-Out Succession Plan
Long-term planning will assist you when you decide to leave your business, as it will contribute to a successful and effective transfer of your business to a successor.
This point is extremely relevant now, due to the current economic climate. When faced with economic uncertainty and the ever-changing nature of business, the implementation of a business succession plan can help you manage the rapid change that accompanies the transition out of a business, and to do so effectively.
A financial planner like Yield can help you develop your succession plan and underpin it with appropriate insurance, in case of an unexpected event, such as death of a partner.
Structure Your Business to Achieve What You Want Personally
A recognisable point of difference between a successful business and that of the contrast, is the ability of the business owner to separate their business need from their personal. Coordinating your business plan to work in harmony with your personal financial plan will help avoid periods of high stress, which can ultimately lead to poor or pressured decision making.
Once you have a business that is regularly achieving its revenue targets, these 5 strategies will help you harvest the maximum profit, which can then be put to work as part of your personal financial plan. Making your business plan work in harmony with your personal financial plan is the critical success factor for most business owners we see, who's business is working for them, rather than just them working for the business.
Yield Financial Planning is Here to Help
Implementing the appropriate financial management strategies is essential for any business, it can often prove to be the difference between success or failure. By taking the time to tend your company, you are likely to reap the benefits. If you feel as though you aren't harnessing the full potential of your finances, don't hesitate to contact our team of industry professionals here at Yield Financial Planning.