Business risks & outcomes you never think about!

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Business planning consultancy Brisbane

Gary Weigh, principal

Answer the following and then ask yourself if you are prepared for these outcomes.  Are you taking unnecessary risks with the future of the most valuable asset you own.  Business planning could save you a fortune if misfortune strikes.

  1. “If you died tomorrow, would your business die with you?”
  2. “Would you be happy to allow your family to inherit your business debts?”
  3. “Would your spouse be interested or capable of replacing you, after inheriting your share of a business in which he or she had no previous involvement?
  4. “How well do you think your spouse and your business partner would fare together in business if you died?  Is it something that either would want?”
  5. “If you were the surviving business partner, how would you feel about being locked in business with your deceased business partner’s spouse?”

The fact is that most owners don’t have a ‘plan B’.  There is no protection or fall-back strategy in place because mostly, the owner’s focus is in the ‘now’ and not in the future.  There is also a general lack of education and risk awareness.  So business planning tends to be replaced by eternal optimism that nothing will go wrong.

However, Murphy’s Law states that whatever can go wrong will go wrong.  It is only a matter of when and how severe.  When a business starts to suffer, there remains a continuing obligation on the owner to repay business debt, personal debt, leases, contractual payments and other expenses.

Finding a buyer at short notice can be difficult and receiving fair value for your equity is going to be impossible if the business is steadily losing money.

To find out more about Business Succession and Owner Exit planning:

Contact Gary on 0408 756 531 or email gary@garyweigh.com

Will you receive fair value for your business?

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Business planning Australia

The reality is that your business, like every other business, has its ‘ups’ and ‘downs’.  Good people come and go, owners become jaded, stressed, and sick.  Accidents happen and with increasing age, an owner chances of dying prematurely or suffering a critical and debilitating health event, significantly increase.

Larger businesses can cope in the owner’s absence because there are enough people and systems to carry on.  However, this is not the case in smaller businesses.  If the owner is absent, the business usually suffers.

Why?  Because, when misfortune strikes and there is no ‘plan B’, it doesn’t take long for the sudden silence and inactivity to cause customers to go elsewhere.  Revenue falls, and market value falls with it.

Planning a prosperous exit, under any conditions, expected or unexpected, is critical because it represents the culmination of your lifetime of work.  It is your one and only opportunity to cash-out an asset which may even exceed the value of your home.

Furthermore, the after-tax and after-debt proceeds from a sale may have to last you and your family for the rest of your lives.  So it is no small undertaking and certainly not the time to be forced into discounting years of sweat equity.

Plan your business exit

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Business planning and management Brisbane

When you think about ‘business planning’ do you think about it only in terms of planning a business start-up or an add-on venture?

Have you ever seriously thought about how you will exit your business on your own terms?  You are not alone.  It is common to be optimistic and trust that at sometime in the future, a buyer will emerge and offer fair market price.  It is not the reality for many.

It may be that you want your business legacy to live on through family succession.  That too can be a path scattered with unexpected challenges.

Like every other aspect of your business, it takes some smart thinking and hard work to achieve the outcomes you want.  To the best of your ability, you want to leave your business on your own terms, even if that exit is sudden and unexpected.

For more information check out my Exit Plan page at http://garyweigh.com/exit-plan

Risk – the fear of loss

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Risk is fear of loss but that fear is not the same for everyone.  This makes risk a subjective concept.  What is perceived as high risk and uncomfortable by one person may be perceived as low risk and feel very comfortable to another.

When financial advisers offer advice or recommend a financial product, they must do so in written statement of advice, but not before they take into account the client’s risk profile.

Product and service providers in other industries could well take a leaf out of this book.  All vendors should show a deeper interest in what a customer is likely to be comfortable with and what is likely to keep them awake at night.

Risk analysis is one very useful tool I have taken from my financial planning tool kit and applied to my business coaching services, and with great results.

It takes a little more time and effort but it basically involves understanding a customer’s perception of risk, identify the most serious risks and introducing information or strategies that helps overcome the risks, and enables the customer to confidently move forward.

Until next time

Gary

Business and divorce

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For most people, divorce is an unpleasant experience.  However, it pays to be cooperative in the process.  The more acrimonious a divorce is, the more expensive it tends to be.

Divorce is a direct path to the poorhouse for many as the same income has to support two households instead of one.  It is often an exercise in survival.

An equitable divorce must be planned if both parties are to achieve a fair result.  So it pays to start planning the finances during the divorce, not after.

Most assets are capable of being split, including superannuation.  Often, both parties are willing to sell the former family home as a means of emotionally moving on.  However, the one asset that can present difficulty is a business.

A business may have been the family income generating asset or it may have represented self-employment for one of the divorcing spouses.  Unlike the family home, it is an income generating asset without which one or both parties might suffer financial hardship.  It is often the case that at least one party wants to keep it.

Selling a business in a depressed economic environment at a fire sale price could be financially disastrous.   Rearranging ownership and perhaps the departure of one working spouse from the business could have a negative effect on its ongoing performance.

I have seen owners of solo service businesses all but shut down their businesses during a divorce, in an attempt to render it worthless.  It is such a shame and subsequent recovery and business building is difficult.  Besides, the aim should be to maximise marital assets, not minimise them.

Instead of muddling or fighting your way through a divorce, think about keeping a ‘cool head’ and doing some ‘smart planning’ with good financial advice.

The power of introverts

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Business building

Thank you so much Susan Cain for having the courage to so ably represent us.  Introverts have such great business ideas but also have great difficulty promoting them.  We create businesses that stay too long in the shadows, relatively unknown.  We love the technical stuff but dislike the promotional stuff.  Networking and public speaking are the hardest things we ever have to do.  The internet marketing and social media outlets have provide introverts with an alternate range attractive promotional options.  We like the elements of anonymity and solitude inherent in sitting at a computer.  But it is still difficult for us to be the centre of attention, albeit in cyberspace.  We still feel as though we are lost in the noise of spammers and extroverts.  At some time or other, we think we need extroverted sales people to do that bit for us, so we can get on with the more grippingly enjoyable tasks of generating internal brilliance.

But there is another way.  That is to join forces and hunt as a pack.  Ok it is going to be a very silent pack but a powerful network of like minds nevertheless.  Take a look at this TED video at http://www.ted.com.  Can we silently and cautiously network with each other, and share ideas and opportunities?  I think we can and together I think we can make a difference.  I hope you enjoy listening to Susan Cain.  She’s my hero.

Get an online business buddy

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Business coaching Brisbane

When you start a new business, there are several challenges to face and money is not the most important.  When starting out, you are likely to be on your own and running your business on the total sum of your own knowledge and experience.  If you have never been in business before you could face an uphill battle.  Typical problems include:

  • Still stuck in ‘employee’ thinking
  • Lack of confidence through inexperience
  • Lack of marketing and financial management skills
  • Having to do everything and defaulting to the easy things
  • No business friend or colleague to talk to or bounce ideas with

You don’t have to do it alone.  Two heads are better than one, right?  For $49.97 per month subscription, you can access MyProsperityForum where you can pick up valuable tips, ask questions, bounce ideas, or get a second opinion.

If you need more then sign up for a little business coaching just until you pick up momentum.

Business coaching Brisbane

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Could you finance 30 years retirement?

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Whether we are employed or business building or both, we all face the same problem.  That is, how to finance that period of our lives from so-called ‘retirement age’ to the day we die.

For many, superannuation will only be part of the story.  For the majority of Australians approaching retirement age, work super will not be sufficient regardless of whether it is in an industry fund or a retail master trust.  Most who struggle with low super balances now would have still faced the same problem, albeit not so severe, even if the GFC hadn’t occurred.

Let’s face it!  The period of time in retirement these days could be 30 years or so.  Even a seemingly healthy $500,000 in superannuation is not likely to cut it over that time span.

We all need to accumulate enough income earning assets to see us through to the end of life.  That requires a pro-active approach to wealth building with sufficient lead time.  The alternative is to rely on work super and the age pension and hope for the best.

Those unable to be fully self funded retirees or who find the age pension inadequate, may have to keep working in some capacity, even on a part time basis to accommodate traditional retirement activities, such as travel and sightseeing.

Business owners might choose not to sell out so soon and stay longer in their businesses, perhaps decreasing their direct involvement.  Others might choose a sea-change, living and working in a different location, or a career change which could include running a home-based business, online or offline.

The point is that whatever the post-retirement strategy is, it has to be planned.  If a new career or business building are to be part of the retirement solution, common sense suggests that they should be planned and in place before existing income sources are terminated.

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A different approach to personal financial planning

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Financial planning is a poorly understood concept that for many people is too expensive and overshadowed by adviser mistrust.  Many avoid financial planners because they believe that they will be sold a commission based financial product that they don’t really want, without being any better off financially.

It may be more intuitive to refer to financial planning as personal money management.  That is the art of generating income, managing household finances and accumulating assets.  You can do such a lot yourself with a little basic knowledge.

Most financial planners are well educated and really good at helping you with the more complex issues or those that carry a truckload of government rules (e.g. social security, insurance, super, retirement, estate planning).

The issue for most people is not that they don’t care.  It is that they don’t know.  People are simply unaware of what they don’t know and they don’t know who to trust to find out.  That is why it is essential to get information from someone trustworthy who does know.

Instead of picking up barbeque tips from friends, why not join MyProsperityForum for only $49.97 a month to have an expert on hand to guide you.  I personally work in the forum most of the time but I do invite guest experts from time to time.  It’s low costand high benefit for you and I am there when you need me.

Biggest money mistakes you can make

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Business coaching Brisbane

There’s a great article in the Sydney Morning Herald headed “The Five Biggest Money Mistakes”.  It is worth reading.

http://www.smh.com.au/money/planning/the-five-biggest-money-mistakes-20120128-1qmxr.html

But wait there’s more …

Here are five (5) more

Be aware that this is by no means an exhaustive list.  I could go on, … and on!

1. Not seeking or heeding professional advice

Listening to hot tips and gratuitous advice from untrained people can be a dangerous pastime when it comes to your finances.  Family and friends can be well meaning but unless they are trained, the advice can be wrong.  A hot share tip is like a hot racing tip.  It is speculative and super risky.  Remember that not all who purport to be friends have your best financial interest at heart.

2. Living beyond your means

If you don’t have the money you shouldn’t incur the expense.  Reliance on a credit card to finance a shortfall is stupidity.  A credit card is not your money.  It is high interest personal debt you can’t afford.  That is the worst debt of all.  If you couldn’t afford the original amount, you are not going to be able to afford the debt plus high interest

3. No emergency money

When you live from week to week there is no margin for error and no room for something going wrong.  An emergency may be as simple as the fridge or car breaking down.  If you have to turn to a credit card to fund the repair or replacement, imagine what you would do if you were without income because you couldn’t work for a few weeks or a few months.

4. Misuse of dual salaries

It used to be case that the second income into the household was committed straight to savings.  Many people now foolishly commit all of their money to a lifestyle based on the notion dual incomes lasting forever.  Use the second salary for something that will enhance your finances, not simply enhance your retail therapy opportunities.

5. Believing that employment income is all there is

Income is king and earning power is unlimited.  Most people are content to get a job and then leave their financial future in the hands of their boss.  That is financial laziness.  You shouldn’t be reliant on bonuses and wage rises.  There are many ways to earn additional income and anyone can do it.

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