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Four out of five businesses started today will not be around in five years’ time. Of those that survive, only one in five will survive the following five years.

You only have three ways to grow your business: (1) by increasing the NUMBER of your clients; (2) by increasing the AMOUNT of units your clients buy from you; 3) by increasing the FREQUENCY at which your customers buy from you.

Peter F. Drucker, renowned business guru, says a business is designed to do one thing only: to create customers through (1) innovation; and (2) marketing. Everything else will be an expense. He adds:

“Marketing is the distinguishing, unique function of the business. A business is set apart from all other human organisations by the fact that it markets a product or service . . . Any organisation that fulfils itself through marketing a product or a service is a business. Any organisation in which marketing is either absent or incidental is not a business and should never be managed as if it were one”.

This summary is designed to help you prepare and implement financial strategies for attaining your business goals, in harmony with your personal financial objectives.

Whatever your business goals – to start a new business, to grow an existing one, to change the direction of a mature business, to leave an existing business for a new venture or to enjoy a secure retirement – we trust you will find this overview helpful in developing the appropriate financial strategies.

If you are not careful, it is easy for your personal financial goals and your business goals to conflict. For example, your personal financial plans might include maximising the income stream from your business so that you can make the largest possible investment in a superannuation fund, but one of your business goals might be to re-invest as much profit as possible in the development of new products or services, new premises or new technology.

In order to avoid such conflicts, it is a good idea when developing your business plan to begin by drawing up a list of your personal financial objectives. Then as you begin to formulate your business goals, you can weigh them against your personal goals and make appropriate adjustments to ensure that you have a coherent overall strategy.

In this section we suggest a number of areas where you might need to consider planning for the future. The key to successful business planning is to set SMART business goals and make a SMART business plan for achieving them:

SPECIFIC : Goals should be straightforward and emphasise what you want to happen. Specifics help us to focus our efforts and clearly define what we are going to do. WHAT are you going to do? Use action words such as direct, organise, coordinate, lead, develop, plan, build etc. Ensure the goals you set are very specific, clear and easy. Instead of setting a goal to improve sales, set a specific goal to improve sales by 20 percent within 12 months.

MEASURABLE : If you can’t measure it, you can’t manage it. In the broadest sense, the whole goal statement is a measure for the project; if the goal is accomplished, there is a success. However, there are usually several short-term or small measurements that can be built into the goal. Choose a goal with measurable progress, so you can see the change occur. How will you know when you reach your goal? Be specific! When you measure your progress, you stay on track, reach your target dates, and experience the exhilaration of achievement that spurs you on to the continued effort required to reach your goals.

ATTAINABLE : A goal needs to stretch you slightly so you feel you can do it and it will need a real commitment from you. The feeling of success which this brings helps you to remain motivated. Running a business can sometimes seem like a thankless task and achieving regular milestones can help make the challenge a little more bearable.

REALISTIC : This does not mean “easy.” It means that the path is not a vertical slope; that the skills needed to do the work are available; that the project fits with the overall strategy and goals of the organisation. A realistic project may push the skills and knowledge of the people working on it but it shouldn’t break them. Be sure to set goals that you can attain with some effort! Too difficult and you set the stage for failure, but too low sends the message that you aren’t very capable. Set the bar high enough for a satisfying achievement!

TIMELY : Set a timeframe for the goal: next week, three months, by year end. Putting an end point on your goal gives you a clear target to work towards. If you don’t set a time, the commitment is too vague. It tends not to happen because you feel you can start at any time. Without a time limit, there’s no urgency to start taking action now. Time must be measurable, attainable and realistic. Everyone will benefit from goals and objectives if they are SMART.

If you are not careful, it is easy for your personal financial goals and your business goals to conflict. For example, your personal financial plans might include maximising the income stream from your business so that you can make the largest possible investment in a superannuation fund, but one of your business goals might be to re-invest as much profit as possible in the development of new products or services, new premises or new technology.

In order to avoid such conflicts, it is a good idea when developing your business plan to begin by drawing up a list of your personal financial objectives. Then as you begin to formulate your business goals, you can weigh them against your personal goals and make appropriate adjustments to ensure that you have a coherent overall strategy.

We have access to considerable expertise and will keep you up-to-date with changes in tax legislation to adjust your business plan accordingly. Many of the decisions you make about the future of your business will have consequences in terms of tax liabilities or tax benefits, either now or at some time in the future.

Although no business decision should be made solely on the strength of tax considerations, you will need to take account of the role tax will play in implementing your strategies.

Just as you will need to monitor and update your plans to take account of changing circumstances, so too can we help you keep up-to-date with changes in tax legislation and adjust your business plan accordingly.

Every business has its own lifecycle, and tax and financial planning is important at every stage in that cycle. Whether your business is new, expanding, or mature; whether you are just starting your first business or approaching retirement, it is important that you make well-informed decisions to ensure that you are following the best strategies for achieving your goals.

As you read this summary we hope you will find new ideas and helpful guidelines for setting your business goals and improving your business financial strategies.

Before you can move forward, you need to adopt goals and a philosophy for your business. In other words, what do you want your business to achieve and what are the values you want to adopt to achieve those goals. You can start by asking yourself:

Why am I in business? What products or services am I going to sell? What customers am I serving and how will they benefit from my product or service. How successful do I want to be? What values will I adopt towards my customers and employees? You must be specific!

Once you have defined your goals and philosophy, it’s going to make it much easier for you to achieve what you have set out to do, because you will know what you want to achieve. Making the right decisions before your business opens its doors can mean the difference between success and failure. Some other questions to ask at this stage are:

What is the best structure for my business? You should consider the pros and cons of trading as a sole trader, partnership, trust or company. Do I have a suitable business plan?

If you need to raise money a business plan will be essential to support an application for finance. Regardless, it will be essential for your planning in the first months and years of your business. A good business plan includes projections of income and outgoings, as well as a clear explanation of how and why your business will succeed.

Have I set up adequate reporting systems and procedures? These are essential because they enable you to monitor, control, and evaluate the performance of your business. They also help you delegate effectively and enable you to focus on the most important tasks, including planning.

Have I given enough thought to my retirement plans? It is never too early to start planning for retirement. Sooner, rather than later you will need to decide what resources to commit to your retirement planning. If you are self employed you may wish to set up one or more plans. If you plan to operate your business through a company you could consider the advantages of setting up a company plan.

Who should own my business? You might think the obvious answer is, ‘Me,’ but using an appropriate structure such as a family trust could greatly simplify your long-term exit and succession strategy. You may also consider share incentives to attract and retain staff.

Many young and growing businesses fail during the early years because the owner is too close to the action – so involved in the day-to-day running of the business that he or she forgets to step back once in awhile to see how the business is doing and whether or not the business plan needs updating.

It is vital at every stage of a business to set aside time to review its progress, but it is especially important in the early years. Using information from your financial and management reporting systems, you should monitor actual performance against projected performance and, where necessary, adjust your business plan accordingly.

Once your business is established and sales are at a satisfactory level it is time to review your business plan and decide how your business should move forward.

If you want to expand both the top and bottom lines of your business you might need to review the entire plan. Should you go for ‘more of the same’ or should you re-evaluate the whole purpose and direction of your business? How should the new direction complement the old?

For example, should you take this opportunity to put your business onto the internet and make use of the new technologies to compete in new, global markets? And if so, how will your new e-commerce activities tie in with your more conventional trading activities?

At some point you will want to leave your business – whether to move into a new venture, or to retire. Either way, you need to plan your exit well in advance to ensure that you optimise your position. You will also need to give consideration to what will happen to your business when you leave. Will it pass on to other members of your family, will your co-owners or partners continue the business, or will you want to sell it to a third party? Whatever you decide, you will need to make careful preparations to ensure the transition goes smoothly.

After forty or more years at work it is time to take a well-earned rest, but you still need to keep one eye on personal financial planning if you want to enjoy a long and comfortable retirement. This may also be the time to begin putting some money aside for your children or grandchildren.

Just as personal financial planning is important at every stage in your life, so it is in the life of your business. We have considerable experience in advising business owners at all stages of the business and personal lifecycle and would welcome the opportunity to help you develop the next stages of your business plan.

Whatever stage you are at in your business cycle you need to:

Remember, you do not need to do all of this on your own. We will be pleased to help at any stage. To develop a SMART plan it is a good idea to start by writing down exactly what your business does, or will do, and then specifying what it is that makes (or will make) your business a success.

Does it have unique features, added value, or a geographical monopoly? Why do, or should, customers choose your business? What would happen if these advantages were lost?

There can be many features that make your business unique, and your plan should reflect how each of these ‘Unique Selling Propositions’ (USPs) will contribute to your business success. With these in mind, draw up a list of business goals and compare it with the list of personal financial objectives you drew up earlier to make sure there are no conflicts.

Once you have a list of specific business goals that harmonise with your personal goals, ask yourself the following questions:

SMART business planning involves not only planning how you will start up and run your business, but also how you will leave your business when the time comes to enjoy a secure and comfortable retirement.

There are two important areas that require consideration:

1 Planning your retirement income

2 Planning your exit from your business

These are closely interrelated, and the sooner you begin to plan for them the better the result you will achieve.

For most people, the retirement pension does not, and will not, provide sufficient income for a comfortable retirement. Successive governments have made it clear that private provision for retirement is now essential. Therefore, throughout your working life – starting as early as possible – you will need to build the resources necessary to provide an adequate income in retirement.

As a rough guide, to maintain your current lifestyle in retirement you will need an annual income equivalent to 60 – 80 per cent of your current income requirement. You need to plan how you will build up a fund capable of generating this level of income once the flow of income from your business comes to an end.

For some people their business is a separate entity that will continue after they retire or leave. For others it is so closely dependent upon their personal input that it will simply come to an end when they stop working. Either way, you need a carefully planned exit strategy that will enable you to optimise your position when the time comes.

Here are some possible scenarios:

Passing on your business to your children or other members of the family. You will need to be careful in your choice of successor, especially if some of your capital will remain tied up in the company, for example in shares. You will need to put in place the right mechanism to effect the transfer and make sure your plan is tax effective. It is important to consider how much control you are prepared to give up on retirement.

In some cases it will not be possible to retain control once you retire, though you may still have a degree of influence. If you are passing the business on to family members, do not overlook the fact that you can appoint them as directors and hand over the day-to-day running of the business while retaining control of the company through your shareholding. Also you may wish to consider using trusts as a way to pass an interest in the company on to family members while continuing to exercise some control.

Selling your share in the business to your co-owners or partners. This might already have been considered and incorporated into your partnership or shareholders agreement. You will need to be able to place a value on your share in the business – or accept a return of capital plus an annuity from your partnership. We can help by advising on agreements and also by valuing your business.

Selling the business to a third party. Again, you need to know the value of your business and how the funds released by the sale can best be invested to provide you with a comfortable retirement or to begin a new business venture. Valuable tax reliefs are at stake here, so consult us early in your planning to avoid an unnecessary tax bill.

Public listing or sale to a public company. This might be an option if you have a sufficiently large business, or a niche business attractive to a larger company seeking to expand its activities. A great deal of care and planning is required if you are to make the most of such an opportunity.

Selling your business to some or all of the workforce. Through company share schemes and pre-sale agreements you can reward your workforce on an ongoing basis in the form of equity – a stake in the business. One possible conclusion of widening ownership of the company in this way might be to pass control of the company to the workforce on your retirement.

Winding up the business. If the business is simply going to come to an end when you retire you need to ensure that when the time comes you collect all monies owed to you and realise the value of the business assets. After all, these are an important part of your ‘retirement fund’. Again you will need to arrange this properly to minimise your tax liabilities and maximise your income in retirement.

Whatever plans you make for retirement, or for withdrawing from your current business, careful planning and the right advice are essential. Careful planning and professional advice are essential at every stage of your business life. The best time to start planning is now. We would be happy to advise you further on developing SMART strategies for you and your business.

Contact Us

You can contact us at the following:

Office Location
Suite 4, 12 Tindale Street,

Mailing Address
Suite 4, 12 Tindale Street,

Phone: 02 4721 7444
Fax: 02 4721 7755
Email: wmw@wmwright.com.au

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