When it comes to running a small business, the odds are almost stacked against you from the get go with more than 60 per cent of businesses failing in the first three years of operation. While there are a number of different reasons why so many struggled to survive, it’s often due to a lack of financial planning.
Running your own business is hard work and can be so all encompassing that people get so caught up in the day to day, they forget to focus on the future. Now with the end of financial year approaching it’s a good time to take stock, look critically at where the business is at and where you want to be in the future.
As well as getting your accounts and tax returns in order, look at where you can save money, review the previous year and set financial goals for the next 12 months and beyond. Setting achievable strategies for the future is key to getting ahead and this is something best outsourced to a financial expert.
I’ve seen couples who have run a business for years and have as little as $40,000 in their super accounts, which sits there idle and runs the risk of being eaten up by fees rather than working for them. People need to stop and think about whether their business is giving them what they need on a personal level and if it’s not, think about what needs to change and how they can do that and still increase their net wealth.
Business owners often have complex situations and it’s important that they are utilising the various structures available, to not only grow their wealth but protect the assets they’ve already accumulated. Whether this is through a self-managed super fund, family or company trust, they all have benefits depending on the individual situation.
How small businesses can stay ahead of the curve
People focus on building their business as an asset with a view that it will be worth something and they’ll be able to sell it for a profit, but this doesn’t always happen. Small-business owners need to think long-term, will their business be viable in 20 years or will the socio-economic or business conditions have changed and if so what is the back-up plan.
Tahni Davison, small business financial specialist, Boutique Advisers