Starting up a business – Don’t let small thinking derail your great idea

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Another common flaw that I see among those starting up a business is to think in terms of survival only.  They measure their success in terms of still being in business in six month’s time.

This is a real mistake!  Doing things on a shoe-string budget invites shoe-string thinking.   Cutting corners and thinking small can cause you to adopt a defensive ‘small thinking’ attitude in the start up phase.  That is not good for business!

If you truly believe in your products and services, then you should look past the first few months and plan for a long and prosperous future.  What is required is an optimistic and assertive strategy.  Even though your resources may be scarce, it is a time for positive, expansive and innovative thinking.

Your business planning and your financial management should address the needs of a business destined to succeed.  That includes its ‘start up capital’ requirements.

“But I only have a very limited budget!” I hear you cry.

Everyone has limitations on their budget.  No one wants to spend more than they have to.  You must decide whether your limited budget is enough to achieve your goals or is it only enough to finance a slow and agonizing slide into oblivion.

If it is the latter, then figure out how to get more money, or don’t start.  That is the whole point of business planning and financial management.  You must do your homework thoroughly and face the future with realistic assumptions.

For more reading on financial management and your path to financial wellbeing, visit http://www.aikido-secrets-to-calm-success.com

Until next time!

The Coach

Starting up a business – The pitfall of giving away equity

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When starting up a business, it is common to see inexperienced business starters with no financial management skills, prepared to barter away equity (ownership) in the early days in return for a much needed service.   For example:

They seek to establish a website as cheaply as possible, even to the extent of offering a e.g. website designer part ownership of the business in lieu of payment

Now I am not against website designers.  It’s just that new business owners think that a website is the first thing they need.  They often see a website as the answer to all their sales and marketing prayers.  Nothing could be further from the truth but that’s another story.

If this is you, consider this!  While giving away a slice of your business may seem to be a good idea at the time, you won’t think so in a couple of years time when you have a million dollar business and a business partner who bought a good slice of it for the price of a website (e.g. $1,000 – $2,000 or so), and now can do nothing else but e.g. design websites.

The first mistake you made was seriously undervaluing your business in the first place when you were starting up the business.  You took the pessimistic view and figured that you were giving away nothing in return for a website with a real dollar value.  What a great deal hey?

Silly ole you!  Deep down, you didn’t really think you would succeed did you?  You didn’t seek advice and you didn’t stop to think that a shareholder in your business is a permanent fixture; as permanent as a married spouse and potentially just as expensive to separate from.

Nothing deteriorates a business relationship faster than a person who doesn’t pull their weight.  After a year or two of having the website designer as a passenger in your business, you will be seriously regretting having this person as your partner.  Oh, a ‘silent partner’ you say?  Trust me, they are rarely silent.

Let’s say you gave the web designer 20% of your business in return for a $2,000 website when you mistakenly valued your business at zero.  When your business grows and is valued at $1M, that 20% share is going to be worth $200,000.   I hope it was a good website.

But wait, there’s more!  The shareholder may not want to sell.  By this time, you might be the best of enemies.  It may cost you a lot more than $200,000 to buy back your business.   And do you have that kind of money sitting in the bank for a moment like this?  The answer is usually ‘no’.

This is why it is so important to seek advice.  Any competent business coach or adviser will tell you that having a partner, with skills you may use only once, and who makes no other contribution except for a couple of thousand dollars of labour and expertise, is a bad investment and an even worse permanent relationship to get into.

For more reading on starting up a business and smart financial management, read my Life Balance series at http://www.aikido-secrets-to-calm-success.com

Until next time!

The Coach

Starting up a business – cutting corners can be a financial management killer!

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Gary Weigh – The Coach

Cutting corners on a lean start up budget is a very common ‘kill your business’ practice.  When starting up a business, it is done because of lack and necessity.  However, in terms of financial management, it could be something you regret later on.  One of the most common examples of corner-cutting that I see is….:

Seeking the cheapest quote for equipment and technology just to get started, even though it is unlikely to handle anything but the lowest levels of activity!

Second rate equipment and technology may be fine for low levels of business at the time of initial start up.  However, they may not be able to handle the increased volume of transactions and information that could multiply quickly as your business grows.

It could all be obsolete in a matter of weeks or months.

As customers hear of your leading edge offering and sales activity increases, expansion is a certainty.  If you cut corners however, expansion may prove fatal.  It may mean starting again with a complete scrapping of your low rate equipment and technology.

This means that you will have to invest money twice over in the first few months of trading.  Not only that!  Expansion may also mean hiring people and finding larger spaces.  Expansion is generally a time of tight cash flow.  It could spell the end of your business.

It seems ironic that your business could fail at a time when you have just weathered the storm and things never looked better.  But it happens a lot.  It is one of the common causes of business failure.

For more reading on starting up a business, financial management and your path to financial wellbeing, start reading from the library to your right!

Also visit http://www.aikido-secrets-to-calm-success.com

Until next time!

The Coach

Starting up a business – The importance of financial management

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How much start up capital will I need? In my experience, the most common way for people starting up a business to estimate their start up capital needs, is to have an educated guess.  The problem is that the guess is not at all an educated one.   Hence the need for thorough business planning and competent financial management!

Those who do try to work it out generally underestimate what it takes to start a business.  Inexperience causes them to not consider many of the issues and costs involved.  Hence ‘initial set-up’ budgeting is done considering only the matters (and costs) that appear obvious to them.  This is often well short of commercial reality.

Many people thinking about starting up a business have no idea about the extent of what is actually involved.  Therefore, they are oblivious to all of the costs involved.

They wonder whether they should trade as a sole trader, a partnership or a company.  They are generally oblivious to the issues surrounding an ABN (Australian Business Number), business name registration, intellectual property and taxation.

It would be so easy to go see an accountant who would outline all the relevant issues and their costs but to many, that means having to spend money on stuff that seems irrelevant to the core task of starting up a business.

Hello!! You can’t hope to be in business without spending some money now and again.  Let me assure you that buying good advice is what the smart people starting up a business do.

For more reading on financial management and your path to financial wellbeing, visit http://www.aikido-secrets-to-calm-success.com

Until next time!

The Coach

Financial wellbeing – 5 Common mistakes in financial management

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  • The first common mistake in financial management is to rush straight into ‘a flurry of activity’ without first setting goals or doing any planning.  It is critical that your ‘flurry of activity’ is productive and prioritised towards achieving your goal of financial wellbeing.
  • The second common mistake is procrastination.  That is, doing the thinking, the talking and maybe even some planning but never getting around to doing any of the activity to make it happen.
  • The third common mistake is never committing plans and budgets to paper.  The problem with keeping it all in your head is that it is easily forgotten.  The plan in the head can easily change to follow an outcome.  The plan must be on paper, out there and shared.  That’s what makes it real for everyone involved.  The plan must come first and outcome second; not the other way around.
  • The fourth common mistake is learning (what passes for) financial management and wealth building from friends and family.  Unless the advice giver is a trained professional, the advice is next to useless.  Smart people surround themselves with much smarter people.
  • The fifth common mistake is to believe that debt is the answer to satisfying every immediate need.  Debt has its place in financial management but it must have a productive purpose; it always has to be repaid; and you must always maintain the capacity to repay it.

For more reading on financial management and your path to financial wellbeing, visit http://www.aikido-secrets-to-calm-success.com

Until next time!

Gary

Financial management – the key to home and business success

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In the quest for financial wellbeing, the two skill sets that the vast majority of people lack are financial management and wealth building skills.

Both are needed to run a successful business and a run a successful household.

Lack of financial management skill is one of the main reasons for business failure in Australia.  It is also the reason why the amount of personal debt is so high.

As a business starter, you spend years learning a trade or profession only to find that you possess only a fraction of the skills required to run a business.  One of the glaring omissions is financial management – the ability to manage your own money.

In your home or in your business, it is highly distressing to consistently run at a loss.  That means debt must be accessed just to make ends meet.  Not only is it a stressful situation to be in, but parents are inadvertently teaching their children some terrible financial habits.

The first step in financial management is to do an honest assessment of your situation.  Being honest with your self is paramount.  Seeking help is the second step.

You may think that you are in a desperate financial situation, all alone in a place that no one understands, but you are wrong!  Talking to a professional adviser can make a world of difference.  Your situation is not uncommon and there are some practical steps that can be taken towards a solution.

The process of changing from bad to good financial management is like quitting smoking.  You need to recognise you are addicted to bad habits.  You have to want to quit and be open to learn new habits.

The new habits will include some simple business planning or lifestyle planning and the preparation of a budget.  The budget shows you the expected result if you follow your plan.  This will be your blueprint for a new direction to financial wellbeing.

The principles of financial management are the same for your business and for your household.  Whatever else you may believe your business to be, it is a valuable source of income to finance your precious family’s lifestyle.

For more reading on financial management and your path to financial wellbeing, visit http://www.aikido-secrets-to-calm-success.com

Until next time!

Gary

Financial wellbeing – Moving forward from budgeting

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Looking for ways to make money for you?  The financial wellbeing budgeting exercise, that I guided you through over the last few posts, is a tried and proven way forward to reaching financial targets.

Those who accepted the challenge and prepared a budget, reviewed it, revised it and shaped it, obviously have the will to help themselves.

The rest of you have either achieved financial wellbeing, or you are still living in a state of procrastinatory inactivity.

I know from experience that the majority if you fall into the latter category, so when you are finished talking and deferring action, feel free to catch up.

The path to positive cash flow

When you complete the financial wellbeing budgeting process, you achieve the following:

(a)    You cut unnecessary expenses – i.e. those that are detrimental or have no worthwhile impact on your life

(b)   You reallocate money towards those things that will have a positive impact on your life and make a real difference to you

(c)    You become alert to ways of increasing your income or decreasing tax

(d)   You achieve positive cash flow in your household (i.e. your after tax income is more than your household expenses)

(e)    You acquire the habit of a lifetime – the ability to budget (set your goals financially) and to review regularly

You have finally realise that you can set a budget that will reflect every financial and lifestyle goal that you’ve ever wanted.  The only challenge is to meet the income target to support it; and there are so many ways to make money for you.

Now you are on the start line, in a position to begin the next phase.  But it is not a time to relax.  The path to financial wellbeing requires action and lots of it.  Whilst that doesn’t necessarily equate to hard physical work, it does mean generating the energy to maintain singular focus and sustained effort.

To do that, you will need reserves of energy over time and that means you must be healthy and stay healthy.  Sick and unhealthy people do not have the same focus or the energy to sustain effort.  They are generally focused on taking it easy and recovery.

So isn’t it lucky that you skewed your household budget towards good health and longevity?

For more reading on ways to make money for you on your path to financial wellbeing, visit http://www.aikido-secrets-to-calm-success.com

Until next time!

Gary

Two sides to the budget story!

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When most people sit down to do a budget they regard their income as a given and look to reducing expenses to create savings.  Financial wellbeing is a lot more than cutting expenses.  There are other ways to make money for you.

Income is never fixed – except in your mind!  If you think like that you will quickly reach the glass ceiling that will keep you locked down in poverty forever.

So here is another piece of wealth grower’s thinking:

  • Income is never fixed
  • There is no upper limit to income
  • The only limit on income is the one in your own head

The objection I hear most is:

“I can’t increase my income because I am already working 50 hours a week.”

The answer to this objection is:

“You must start thinking outside the box!”

Do you think for a moment that wealthy people earn a million dollars a year by working 40 hours a week at an hourly rate of $500 per hour?   Of course they don’t!

You have assumed that everyone is like you …. that they are employed by someone else and selling their time.  By doing that, you have already placed a limit on your income because there is a limit to how much time you can sell.

There are only 24 hours in a day and 7 days in a week.  Therefore there is a limit of 8,736 hours in a year.  It might sound like a big limit but it is still a limit – and you have to sleep sometime.

Your budget is your opportunity to at least recognise the need for additional income, and work out how much more you need.  How you actually achieve it is a matter of strategy.

So you can see that budgeting is not only about cutting down and re-prioritising household expenses.  Your first pass budget is your wake up call!

And then when you figure out ways to make a surplus in your household, your budget becomes your blue print to financial wellbeing.

Your goal to earn more income and build wealth starts with your budget. It the simplest financial planning tool of all to make money for you.

Yes it might require some time and tears; and eventually some creative thought; and yes it may well involve a bit of hard work and sacrifice.

But at least I have pointed you in the right direction.  Whether you move forward or not is your choice!

For more reading on ways to make money for you on your path to financial wellbeing, visit http://www.aikido-secrets-to-calm-success.com

Until next time!

Gary

A budget is your path to plan and build

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The aim of a budget is to plan and build to the point where you achieve financial wellbeing.  Now that you have completed both the income side and the expenses side of your budget, it is time to review your work, and get ready for a few home truths.

This is the time when you may realise some stark home-truths.  For example:

  • Your budget should be viewed as a plan for the future, not merely a reflection of your past spending habits
  • There are certain expenses you can’t avoid (e.g. rates, loans, rent etc) and there are others that are entirely discretionary (e.g. food, clothing, personal items, treats, eating out).  In other words, it is up to you whether you spend the money or not.
  • You may find that you have little or no savings (i.e. too bad if the fridge breaks down)
  • You will never be able to afford that holiday next year unless something changes
  • You have eliminated takeaways but you still can’t break even (i.e. your expenses are still higher than your income).
  • If you are running your household at a loss, the difference will be reflected in your increased borrowing.  Now you realise why your credit card bill keeps rising
  • You don’t have health insurance, enough life insurance or superannuation so your entire financial planning is at risk
  • That your dental bills are high and perhaps you should review your health insurance to include dental cover
  • Now that you see the expenses involved, it might be too expensive to run two cars
  • You are spending a fortune on packaged food and treats at the supermarket and not enough on fresh food.  It may be cheaper to acquire more cold storage and buy in bulk
  • You may want to divert some money to long term savings
  • You may start thinking about how you can earn more income
  • You have several loans and they may need to be consolidated
  • That if you want to continue on just the way you are then you are going to have to increase you income

You may wish to revisit some of your ‘expenses’ on your budget planner and re-prioritise them.  So it is now time to make a second pass at your budget.

For more reading on ways to plan and build your way to financial wellbeing, visit http://www.aikido-secrets-to-calm-success.com

Until next time!

Gary

Drawing up your personal expense budget

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Do you seek financial wellbeing?  Last time I talked about the income side of your budget.  Now let’s continue with the expenses side of your budget.

Before you start make sure you have your file of bills paid.

As I said last time, you should start with an annual budget, and break it down later to a monthly budget.   Be aware that you will have expenses that are paid yearly, quarterly, monthly and weekly.  There will be other outlays by cash or card that you might make on an ad hoc basis (e.g. personal items or eating out)

You will need to convert all of your expenses to annual.  If you are using the FIDO budget planner http://www.asic.gov.au/fido/fido.nsf/byHeadline/Budget planner, you will find that the ‘On line’ and ‘Excel spreadsheet’ versions have a payment converter (in blue).  Use that to convert your expenses to annual.

Expenses

There are 10 broad categories:

1.      Housing

2.      Utilities

3.      Transport

4. Food

5.      Education

6.      Medical

7.      Maintenance (child)

8. Personal

9.      Other

10.  Loan Expenses

The highlighted categories are areas of largely discretionary spending, where your costs may have blown out in the past.  These are prime areas to tighten your spending.

If you are using an electronic version of the FIDO Budget Planner, your sub-totals and totals will be calculated automatically.

Now that you have completed the first pass of your budget we will review it and find ways to refine it.

For more Brisbane business building tips and financial wellbeing articles go to http://www.aikido-secrets-to-calm-success.com

Until next time!

Gary