Words of wisdom

Tips for business operators

Starting your own business

  1. Before you begin a business, get to know yourself first. You have to look at yourself long and hard because running a business will require certain skills and character traits from you. For example, you must be resourceful in times of financial restraints or limited materials and staff, curious enough to ask questions of how to do things better, the tenacity to stick with it if you believe your product and/or service is good, and many other factors.

    And you must have some skills in cash flow management, customer service and marketing.

    So don't be afraid to gather more experiences and undertake training to help you prepare yourself for becoming a successful business operator. The more experiences and training you can get, the higher the chances of you succeeding in running your business.

  2. The next thing to do is take care of your personal finances. In other words, do you have a debt on your personal credit card? If so, it will impinge on your ability to run your business because of the interest and other monthly repayments you have to pay back to the credit card provider. In other words, you could be seriously tempted to draw money out of your business to pay for your personal debt and this could stop the business from starting up properly. You have to deal with your personal financial side just as much as the business financial side because it could turn out to be a financial drain on your business and this may be enough to stop you from properly getting your business off the ground.

  3. Once you have your personal finances in order, look at how much money you need to live on and how much money you need to commence your business. Sometimes selling your mansion on the beach or penthouse in the city and perhaps getting rid of a few butlers in favour of a smaller self-managed home may help to reduce the amount of money you need to live on and hence reduce the drain on the financial side of your business. Also, choosing the type of business you want to commence can make an enormous difference in reducing the commencement costs. For example, starting a business online is usually a lot less to commence than building a factory and buying major solid equipment.

    Now write down all the actual expenses and operating costs of running your business and how much extra money do you need to have to purchase your initial range of stock for selling. Try to think of every possible expense and cost likely to arise in your business.

    Once you have estimated the expense and cost of commencing your business, speak to a trusted accountant to discuss your estimate. Is the estimate accurate? Don't be surprised if you underestimate the cost of running a business because your accountant may consider things you have not thought of before (such as accountant's fees, insurance etc).

    Do you now know how much it will cost to commence and run your business? Okay. How much savings do you have to make it all happen? Not enough? Where else can you get the money?

    You can remortgage your house, but that's risky. Or you could get partners or an investor to join the party so to speak. But they will need to be convinced of your business model.

    Thinking of taking out a bank loan? Unless your bank manager loves your business model and can see an obvious return, you are better off relying on your savings or getting a job and earning some extra income to make your business a reality.

    If money is still a bit on the tight side, what can you do to reduce expenses and costs? Can you increase sales in your business? Or by choosing, creating or tailoring the right products and/or services, you could make an immediate sale needed to pay for the costs of commencing and running your business.

    Keep doing this until the financial hump of starting your business is small and you can easily make your business a reality.

  4. If your personal qualities and skills and your personal and business finances are ready, get to know the people around you, especially those who can give you the support you need to commence your business. Who knows? These people could be your potential customers, your competitors, your business mentors, your accountant, your family members, and even your friends. If you find anyone who is constantly reminding you that your business will probably fail or they don't believe in your business, then do your famous spring-cleaning jobs. It is time to stick with people who will support you, instead of trying to discourage you.

  5. Getting to know people is also the way to delegate less-important tasks in your business to professionals who are experts in handling those tasks. You see, you don't have to be an expert in everything and to run the entire show if you don't want to. Find out the people who can do things for you at a good price or other incentives and you won't have to get caught in the day-to-day stuff such as learning about new legislation affecting your business, book-keeping etc. That's why most businesses employ an accountant, a lawyer and other professionals as they need them by getting to know other people.

    Of course, there is nothing wrong in doing it all on your own. It may help to reduce weaknesses in your business from people who may not be doing their part to support the business. Or going at it on your own could be a weakness in itself if you don't have the skills and tools. Generally, if you have the right skills and tools at your fingertips (e.g. access to the Internet, a finance package, a contacts database etc) and have set up your business in such a way to make it easy for you to handle all aspects of a business, you could in fact run the entire business on your own (depending on what it is). But remember, if the number of products or services you sell starts to get very high or is very specialised, you may need the help of others to reduce the workload and make it easier on yourself.

    As Niamh Ni Aodha, manager of the Business Enterprise Centre (BEC) in Sydney, Australia, said:

    "You can be a great graphic designer, but if you've no financial acumen you either have to learn about it or bring someone in who has those skills. You could be the greatest web designer, but if you can't market yourself, your idea won't necessarily get off the ground. You have to build alliances with people of different skills." (1)

  6. Getting to know people is also called networking. To improve your networking or knowing others and what they do, go to your local industry association. And yes, go to those silly breakfasts (well, at least the food and possibly some business tools from other companies are likely to be given away for free) and pass around your business cards to everyone you see (or target those likely to be useful to your business). That's the way to get into certain markets such as the business and government areas. People buy people, not the services or even the products. Of course the disadvantage of networking is that you can't be everywhere for everyone to see you. You have to take a balance. Advertise through other means. Make your products available by other means.

  7. In a L-brain world where people pride themselves on talking and socialising, networking is the key to business success. Just see the term networking as a sophisticated business term for the familiar activity we call meeting with other people and talking about ourselves and our benefits and getting to know the same with others as there could be opportunities for you in knowing what others do (as well as the usual chit-chat to start things off). Just talk about yourself a little, what you do, and what you have got to sell. Talking often leads to opportunities. However, remember, you can't be everywhere to talk to everyone. It is time consuming and you are only hoping to get a few very good opportunities to make lots of money from the government or business market. For the consumer market, use other means of advertising and use the concept of frequency or how regularly you advertise to get the message across to enough consumers as possible.

  8. On the bureaucracy side of things, life is getting easier with Government web sites allowing you to fill in paperwork online such as getting a license, registering for GST and so on. In the state of New South Wales, Australia, the main web sites you should visit are the Business Enterprise Centre (BEC), the Australian Securities and Investment Commission (ASIC), the Department of Fair Trading (DFT) and the Australian Taxation Office (ATO).

  9. A good businessperson is someone who asks "What might stop this business/product from becoming successful?" and then have the tenacity to find out how to solve the problem.

  10. A good businessperson is someone who can also learn from his/her mistakes and move on. Don't dwell on the specifics of whatever went wrong for you. See the big picture of your mistakes as an experience and thus an opportunity to do something better or differently.
  11. A successful business is one where easy access to resources is paramount. For example, if your business is next to a major arterial road in a city and/or you have access to all the major raw materials in your area to make your products, you are more likely to succeed because of lower delivery and manufacturing costs and thus a more attractively priced product to your customers.
  12. Being in business is essentially about selling products and/or services to customers. So if you are in the business of selling something, get to know your product(s) and/or service(s) intimately. Be experienced with your product and/or service. Don't let the customer see you don't know what you are talking about. Know your products(s) and service(s) and present it in a way the customer can understand. Do this and you will go a long way to achieving success in your business. This is really the best way for you to not only believe in what you have to sell, but also to successfully sell what you have got to your customers convincingly.
  13. How do you know more about your product(s) or services(s)? Sometimes the best way to get to know your products or services is to be part of the group who designs and builds the products from scratch or who delivers the services directly to the customers. Or alternatively try to use the products or services yourself as if you are the customer. Ask yourself, "Would you be happy to buy and use this product if you were offered it by another salesperson?" and "Are you happy with its after-sales service and support?"
  14. If, for any reason, you are not quite happy about your products, be prepared to make improvements or change the products. Design your products so that they can be modified easily. In fact, nowadays, many small businesses are focussing on the ability to tailor their products to suite individual or group needs. And to do that, you have to have a good flexible and well-thought out product design in the first place. As Mr Peter Nash, head of financial services at KPMG, said:

    "I think what we will see is a greater tailoring of product, rather than the one-size-fits-all approach." (2)

  15. If you are not totally obsessed with making money (and thus be motivated to sell anything in your business without knowing much about the products or services, which is a common trait for most men running a business), then you should be able to find the time to be experienced in your products or services. Then it is easy (i) to believe in what you have to offer; (ii) to know what the product can do; (iii) to see the quality of its design, construction and safety and hence its suitability to the consumers ; and (iv) to convince others to buy it.
  16. When starting a business, you have a choice of either turning something abstract (e.g. an idea) into something concrete (i.e. a solid "in-the-hand" product) and then try to sell by the millions, or make the abstract so realistic and feasible that you can sell it to one or more well-chosen organisations or individuals for a good price (the usual approach by inventors). However, in a world were people normally expect to see (and will often believe in) a real, complete and physical product to use immediately, it is not surprising if you should end up starting a business in the former situation. Decide what is easiest for you, what the customers want to see, and will not cost you a lot of money to be successful.
  17. If you intend to sell solid "in-the-hand" products to the international market, check out the services provided by Tradex for Australian businesses. To export products, you have to go through Australian customs and pay custom duty and even GST on imported goods intended for re-export or to be used as inputs to making export products (the exports must be done within a year). But if you are registered with Tradex, you can benefit from paying no custom duty as well as no GST on the imported goods. Also check the Australian Government web site for exporters known as AusTrade. The Australian Government knows very well the importance of delivering products overseas for a healthy Australian economy. The web site is just the way for the Government to show how it is prepared to bend over backwards to help any new and existing exporters get their products out into the international market. Hence the purpose for the web site.
  18. Don't be put off from the idea of selling ideas to others if this is all you have at the moment. If the ideas are very good, original/unique/different, and shows clear practical benefits in having them brought to reality for the consumers or other markets to enjoy, then go for it. Just get extra support from people and/or other resources to help get your ideas up and running. And remember to sell yourself and your ideas or products well to others.

    Or if the ideas are already in prototype form, you could get financial and other assistance in Australia from a place called AusIndustry and implement a program from the government called Commercialising Emerging Technologies (COMET). This is highly competitive and will be based on the ability for your idea to sell well overseas and within Australia compared to other innovative businesses applying for this program.

  19. If you are still looking for new ideas when starting a business, consider looking at the new ready-made innovative technologies already being sold by other businesses (usually the ones who are also starting up as well). Perhaps you can see an innovative way to use the technologies and create a new service or product that other people may need or want.
  20. Another way of generating ideas for potentially new products and/or services is to apply some clever marketing techniques of segmenting the market. For example, use psychographics to gather information about people's lifestyles. In other words, how do people live, spend their time and money, the activities pursued, and the general attitudes and opinions about the world people hold in their minds? This may give you a clue. Or perhaps you might like to look at behavioural aspects of people, such as understanding why customers prefer to do things in a certain way under specific situations and the benefits of performing that behaviour. This may help you to realise there might be a better way of doing things and hence a new product or service opportunity for your business.

    Also don't restrict yourself to these marketing areas. Check out the demographics (e.g. age, occupation, race, family life cycle, gender, education, nationality, income, religion and family size, which is useful to determine whether there is enough numbers of customers in a specified area to buy a certain product and/or service) or geographics (i.e. information about the places people live and work) and see what you can come up with.

    Remember, use your solid marketing information to help you along the path of greater success which you deserve.

  21. When you come up with new ideas, try them out on people who are not in your industry. You would be surprised with the creative and interesting results you may get. Only go to people within your industry for advice and support relating to the actual moment when you have already got your business up and running, or very close to it.
  22. See this important moment of starting a new business as your creative phase, or the crucible for generating new ideas and ways of doing things. You're aiming to be really innovative and eventually a true leader in your chosen business field. Remember, you don't always have to follow the herd to achieve success in your life. Later, when you run your business, you can be more in the rational phase in order to get a quality product or service to your customers in reasonable numbers and as quickly as possible.
  23. Apart from creativity and rational skills, your emotion is the other thing you need to help push you to find the answer. Whatever answer you find, it should be positive for the environment and to the people who may implement your solutions in the real world.
  24. If you have a product or service already worked out and know what you want to do in your business, try to think about the long-term consequences of selling them. For example, can the product or service be personalised to suit different customers? Is the product or service really useful to people? Will the product or service be friendly to the environment? Can I recycle the product or service?
  25. On commencing your business, make sure you have practical, useful and reliable tools to help you achieve the goal(s) in your business. Otherwise it will cost you more in time and money to make them work properly in your business.
  26. If you have a girlfriend and are likely to get married when starting your business, always prepare a pre-nuptial agreement, or better known as a Binding Financial Agreement (BFA). The statistics for divorce are unfortunately very high and should you ever have to break up with your partner, you may find yourself in a highly complex and expensive legal minefield of who gets what. There is nothing sacred in the legal arena. Anything by way of business, personal and financial property can be divided up at time of divorce. So prepare the BFA at this stage if you want to minimise the headaches later on. And take great care when drafting a BFA to ensure all the legal requirements are met. Ideally, you should talk to your solicitor or lawyer for advice on preparing a legally-binding BFA.
  27. Don't expect your business to startup overnight. Many successful businesses can take up to 10 years to get properly started and earning a reasonable profit.
  28. If you are contemplating on borrowing money to start your own business, ask yourself whether it is worth getting into some debt now. Do you have enough money of your own to start the business? Can you minimise expenses and running costs in other areas?

    If you have to borrow money from a financial institution, look at your financial projections and cash flow for the next two years first and make sure they are as accurate as you can get them. Then look at your marketing and see if it is telling you the customer numbers will be there to support your business. Next, talk to your accountant for advice. If he/she recommends it is okay to borrow money, then do so.

    When borrowing money, consider the help of an independent 'non-commission-based' loans broker who can look at many loans from a large number of financial institutions at once and recommend the best loan for your situation. Don't restrict yourself to financial institutions you are familiar with in your local area.

    Next, look not only at the interest rate you will pay and your total monthly repayments, but also see how it will affect your cash flow and financial projections for the next two years. Can you afford the repayments?

    If you have decided on a particular loan, also look at how long your repayments will last for. If the repayments are going to last longer than 5 years, you would be wise to consider going for a fixed interest rate loan. For shorter time frames, a little flexibility in the interest rate may be okay if the prospects are good for the interest rates to go down over the lifetime of your loan.

    Variable interest rate loans may look more attractive than fixed rate loans, but be careful. Changes in the economy and share market could see the variable interest rate suddenly rise above the standard fixed rate.

  29. The experience gathered from the top 100 Australian businesses listed in the 10 March 2000 edition of the Australian Business Review Weekly page 68 is distilled in the following quote:

    "Many of the entrepreneurs...have learnt the hard way that if they do not understand and control cashflow, there is no growth. They also warn would-be entrepreneurs to watch debtors, keep the bank manager informed, have sufficient funding in place to support expansion, and invest everything back into the company. One of the biggest mistakes they made in the early years was to under-capitalise and "do things on the cheap", which affected everything from marketing to hiring decisions.

    'Plan for growth from the start, they say, by assuming that the company will be a success. Aim to quickly dominate the chosen market segment. Franchise, form alliances, establish joint ventures do whatever it takes to expand nationally and globally. The entrepreneurs also advise people to take risks, spot new trends, and move quickly to create subsidiaries then spin them off into new businesses." (3)



Buying another business

  1. Are you contemplating on buying another business as opposed to creating one yourself? If so, make sure there are no multiple conflicting Balance Sheets or Profit & Loss Statements in this other business you want to purchase. Use an experienced accountant to get to the original financial information of a business before making a decision.
  2. When buying a new or existing business from someone else, try to look for the more successful businesses. By "successful businesses", we mean don't just look at how much profit is being made in the businesses. Also look at the people who are working there and the products and services they sell. For instance, are the products and services the sort of thing you would want to buy? And what about the staff? Are the staff members and managers happy doing the work? And are they a balanced lot of individuals, such as having both genders and of different ages and races? If so, this will increase the chances of the business in solving any problem it faces and thus becoming more successful in the marketplace.



Taking out a loan

  1. If you, at any time, intend to apply for a loan (either for business or personal reasons) from a financial institution (i.e. credit unions, banks etc), check your credit record. Financial institutions will almost invariably rely on this record to determine whether or not to approve the loan. Actually, the financial institutions are so reliant on this information that if there is any black mark against your credit record, you could easily be denied a loan. That's why there have been some awesome stories of people worth a few million dollars who had trouble getting a loan because their credit record showed a bill for a measly $100 had not been paid. So before filling out application forms to get a loan from a bank or any other financial institution, get your credit record in order.

    For Australians wanting to investigate the status of their credit record, please write to:

    Baycorp Advantage Public Enquiries

    PO Box 964

    North Sydney NSW 2059

    When writing to Baycorp Advantage, remember to include the following details:

    Your full name

    Your date of birth

    Your current driver's license number

    Your current residential address

    Your residential addresses within the last five years (if different from your current address)

    A daytime telephone number

    Your signature

    and a free copy of your credit record should arrive in your mailbox in roughly two weeks.

  2. When getting a loan, a lender will be interested in seeing how long you have been in business, your cash flow records and tax returns. But most importantly, lenders want to see what type of collateral you are going to put forward to secure a loan. Most lenders lean heavily towards some form of residential property as security even for a loan of up to A$500,000. Your business premises (if you own it) or your home may be used as collateral. But always remember to back it up with a healthy long-term cash flow before using your home as a security.



Insurance

  1. All businesses worldwide, whether you are starting up or are already well-established, are currently affected by the insurance crisis (2001-2004). Depending on your type of business and the industry you are working in, you may be forced to pay the high price for insurance (which is considered a mandatory expense for businesses if you want to be fully protected from litigation due to the way you operate your business). In essence, any business that runs in a high risk industry in the eyes of the insurance companies is expected to pay hefty a insurance premium. Some of the industries affected include tourism, health and other service sectors of the economy. If you are involved in a high risk business, ask yourself whether you can afford the insurance costs before starting your business.

    Insurance costs too high? Check out what is happening at the government level to solve the crisis. For example, the ACT Government is trying to become the first state in Australia to develop a new insurance scheme. The scheme is based on a deal made recently with a consortium of insurance companies designed to provide the ACT with the lowest insurance costs anywhere in Australia. Instead of a single business trying to get the best deal from an insurance company, the clout of the ACT Government together with the backing of more than one insurance company and changes in the ACT insurance legislation as part of the deal will effectively solved the insurance problem for ACT businesses.

    Among the changes to the legislation include any notification of litigation against a business to be made within 90 days (controversial), the introduction of Proportionate Liability, and a simplification of the law of negligence to help speed up the process and so reduce the costs for businesses.

    The legislation part of the deal was yet to be passed in the ACT Assembly. So far there is opposition to some of the legislation.

    Or alternatively why not create another business with much less risk and hence a better chance for you to succeed in life?

    Of course, don't feel like we are discouraging you from running your own business! We don't want to see your business go under because of a legal problem brought on by a consumer. Better still, get some quality advice at https://www.insuranceadviser.net/contact-us and find out where you stand in the business. Follow the course online and you can learn how to be better protected and hence lower the cost of insurance for you.



Steps towards developing a successful business

  1. Can you guarantee the success of a business? No. You can't guarantee the success in your new, fledgling business just as much as you can't guarantee you won't ever have to pay tax to the Government. To dramatically increase the chances of success, you have to know your market first, find out what people want and need, then put into practice the unique or different solution(s) you have found to fulfilling those needs and wants at a price the people are prepared to pay. Remember, the price has to be well above and beyond the costs needed to make the solutions available to your customers so you can make a profit and be able to compete with other similar businesses.

    If you are one of those L-brain types who want to see the logical steps involved in being more successful in business, here they are:

    1. Strategise

    Develop a plan of action (i.e. the business plan). You have to know why, how, where and when in running your business on paper so you can be sure you have the cash, time and other resources to make your business a success.

    2. Systemise

    Get the tools you need to make your product(s) and/or service(s) and to run your business.

    3. Synergise

    If you employ people, make sure everyone is aware of the goals of the business, the customer service charter etc. And let people become self-managers as they apply their own special creativity to improving the product(s) and service(s) to customers.

    4. Supervise

    Being the manager of your own business means knowing what is happening in your entire business. For example, understand the financial tables used in your business and what they mean; see how the customers behave and respond when purchasing the product(s) and/or service(s); look at how your employees are delivering the product(s) and service(s); and make sure the product(s) or service(s) are being delivered on time and is what the customer wants.

    5. Dollarwise

    Minimise your business costs and expenses where possible without sacrificing quality. Get the maximum bang for your buck. Do your own budgets and look at the benefits to your business before committing your hard earned cash to something. And learn to put some of your money earned in the business in a safe place for a rainy day. You will never know when you might need it.



Getting help

  1. Need more advice on starting your business? For people in the ACT (i.e. Australian users), visit BusinessACT at https://www.business.gov.au. This is literally a one-stop shop for practically everything to do with business — from starting your own business (the size doesn't matter) to growing your already well-established business into other markets. The web site has complete licensing requirements and information about grants and other support services.

    For example, there is a thing called a Fast Track Intervention Assistance program designed to provide up to A$1500 to help you develop a business plan or some other aspect of starting a business.

    Other programs exist (e.g. Knowledge Fund) if you are looking towards purchasing ACT land to run your business, turn your knowledge into practical products etc.

    Remember, any money that is made available to help your business through these programs is not given to you. Usually you must find a consultant or another professional to help you achieve the tasks you want. Also your business must be in a position to employ workers from the ACT to benefit from these financial incentives. So if you are on your own or with your own family running a microbusiness, you may have to rely on your own finances and initiative.



When running your business...

  1. How you fundamentally operate your business and treat your customers today should be the same 20 years from now. Perhaps your products or services may change over time, especially in the technology sector. But the way you provide advice to customers and deliver products and services to customers should be the same if it is of a high quality (i.e. good customer service).

    Furthermore, another thing to change over time is that you should be working smarter over time, not harder.

  2. People will often say market perception of the value of your product or service is more important than the product or service itself. For example, if you are lucky to get approval from a famous company like Volvo to have the Volvo logo associated with your product, it will give your product greater value in the marketplace. Unfortunately, given how easy businesses have followed this advice and then sell poor quality products, it is far better to balance this with a good solid and useful product and not just a good perception of the product through effective design, advertising and other marketing approaches.

    Make sure the products are good before deciding whether they need to be dressed up in a way to make them sell well.

  3. Running a business nowadays is becoming a lifestyle. Why? Because of globalisation, many businesses are making available their products around the world on a 24-hours-a-day and 7-days-a-week (or 24/7) basis using technology like the Internet. If you have similar products to sell in the marketplace, you will have to compete. And that means being a 24/7 business. So use the Internet and automate as many functions as possible to keep your business separate from your personal life (well, at least try anyway!).
  4. Only do the work you are able to do comfortably and still keep a smile on your face. At first, it is easy to grab any amount of work when starting a business. But the big lesson in life is learning to do what you can. Give your customers the names of your competitors should work get excessive. Or let the customers know when you can get back to them and if they are still interested, put them on a timetable or list, and keep them informed regularly how close they are to benefiting from your business product(s) or service(s).
  5. Do you want to employ manager(s) in your business? Be careful who you choose. For example, in the IT industry, people need to constantly change and adapt to new ideas. Young people are usually best for this. But if these types of people are also made to run the management side of a business, there is a risk of not having enough experience, practicality and knowledge to understand and sell products properly in the marketplace and make the right decisions. Try to hire managers who are balanced in their thinking. Sometimes two managers are better than one if one manager is young and creative and the other is much older and experienced. Or if hiring just one manager, find someone who has experience in all areas as well as having the creativity to try something different as well.
  6. Where your business has to mass-produce something and sell it quickly in large quantities to the general public with the sole and exclusive aim of making a shear profit and nothing else (perhaps after-sales service and support is non-existent as well), male managers tend to excel in this area. If a business requires more creativity and people skills as well as good communication, and thus longer-term service to customers, females tend to do better as managers than males.

    If you intend to hire managers in your business, you would be better off trying to get a mixture of both males and females of different ages, both being open-minded to new ideas from each other and their staff.

  7. Managers must be open to new ideas. It is good and fine to have a manager who can stick to a tried-and-tested method of achieving business-related goals. But sometimes, it will be necessary to try something different. When testing new ideas, gather as much information as you can and discuss it with others you can trust to see what might be the result.
  8. For women who need some inspiration and advice from other women who run businesses, here are a few quotes you may wish to contemplate within your own successful and prosperous life:



    Don't be afraid to ask for advice when you need it

    'Seeking and receiving expert advice for your business is not a sign of weakness. Whether it's a bank manager, an accountant or a business associate—it's there for the taking. Also, I think you can never get too arrogant and think you don't need some form of help or advice." (Suzi Dafnis, the National General Manager of the Australian Businesswomen's Network and owner of the highly successful multi-million dollar Pow Wow Events International, a company for delivering live seminars and online events to more than 200,000 people; Horvat 2002, p.14.)



    Don't be held back from achieving your business aims

    "Nothing can hold a woman back in business, especially if she has the drive and the skills to succeed.

    'The one great advantage of being a business owner — regardless of your gender — is the sovereignty you have over your own life. While challenges will always arise, you can more or less call the shots when it comes to how you handle them, where and when. No-one can hold you back." (Suzi Dafnis; Horvat 2002, p.15.)



    Be around people who will encourage you to succeed

    'My greatest inspiration was my grandmother who I was very close to throughout all of my most formative years. She encouraged me to believe I could do anything." (Imelda Roche, described as the 'great dame of business', runs one of the world's largest cosmetic companies called Nutrimetics; Horvat 2002, p.15.)

    NOTE: Anyone can be the source of encouragement for you. Just clean out those people in your life who are holding you back and seek those who are willing to encourage you to succeed in whatever you want to do; or just go out and do it if you are one of the more independent types.



    Be determined to succeed, show lots of energy and other positive attributes

    "Determination, focus, energy and commitment combined with confidence, good communication skills and the ability to share a vision and empower others. Women in leadership roles must be more subtle and inclusive, emotionally tough while not abandoning their feminine characteristics. They must accept that they cannot be superwoman and employ as much domestic help as they can afford." (Imelda Roche; Horvat 2002, p.15.)



    Don't worry about what men are doing in the business world

    'The statistics tell the story. It's more of a man's corporate world. International Labour Organisation (ILO) research in 2001 revealed only 1.3 per cent of the top jobs in corporate Australia were held by women, and women on private sector boards vary from 4 to 10 per cent depending on what research you use. According to current rates of progress, it will take more than 170 years to reach parity! It's a whole lot more positive in the SME [Small-to-Medium Enterprise] market with women comprising a third of all CEOs in Australia, and close to 60 per cent of business having at least one woman operator. Women business owners in Australia are changing the way business is done, with more emphasis on social, community and environmental issues." (Amanda Ellis, the head of women's markets for Westpac Banking Corporation and the chair of the Global Banking Alliance; Horvat 2002, p.16.)

    NOTE: Even though men dominate the corporate world, they create the most social and environmental problems. Women must therefore stand on their own two feet and create the world they want to see and share with everyone else. You are more likely to succeed in achieving this worthwhile goal by running your own small business.

  9. IMPORTANT: As a manager (or even the CEO of a big company), you need to know every item for income and expenses.
  10. Itemise everything that is sold. Find out what people are interested in and maximise those areas if the demand is there.
  11. Focus on products that people need or will be important for the future. If the products are well-chosen, you may not need to spend money on advertising for the products to sell well in the marketplace. In fact, if the population supports what you have to sell, you should not have to spend a great deal of money getting the product "out-the-door" so to speak.
  12. As far as costs are concerned, you should be on the lookout for ways to minimise your overheads. But remember, always think about the emotional impact a cost-cutting program can have on people, especially those who may be employed in the business and the customers who depend on the business for your products. Ideally, you should not have to sack people or increase the price for products, just reorganise the business and the savings will be made in other areas.
  13. If buying in bulk for certain supplies in one year, talk to suppliers to negotiate a discount. If you buy as you need something, you pay the full price each time.
  14. When negotiating on something, always give yourself time to think through all the issues including all the offers being made on the table. Never be pressured into accepting anything straight away. Because once you accept the offers verbally or otherwise, you may be legally required to stick with your decision or else face possible legal and financial repercussions.

    If the deal to be negotiated is a quality and honorable one, it will always give you the reasonable time you need to think through the issues.

  15. If you make stock purchases, you do not need to send in the warranty cards because this is just an invitation to go on a mailing list. Proof of purchase via a receipt is all you need as warranty.
  16. When running your business, don't always focus on your competitors and then try to match whatever they are doing. Focus more on your competitive advantage and sell it in the best way possible. Keep looking for a competitive advantage in order to stay ahead of the competition.
  17. Don't try to throw buckets of money into expanding and having a physical presence within the market you want to target. Start slow and concentrate more on selling a quality product or service to your customers together with a good service attitude.
  18. Keep accounting decisions and management decisions separate. Your concern should be management decisions unless you want to run the entire business on your own and can do it quite happily.
  19. If your business needs a car, buy the newest car and sell it after two years and then buy another new vehicle. This reduces maintenance fees over the long term. Otherwise, purchase one very good car that runs on the oil of a rag and barely needs maintenance. Or better still, lease a motor vehicle instead of owning it outright. Leasing a car is a taxable deduction.

    When starting off a small business, we don't recommend buying a BMW, Jaguar or some other luxury car unless you have plenty of money left over to commence and run the business. And anyway, most luxury cars will usually cost an arm and a leg by way of the extra petrol and general maintenance. Go for a good, highly reliable, almost maintenance free, and low cost car for your business needs. If you business requires to have a good image and a luxury car is essential for the business, consider leasing the car.

  20. Assets are listed at the depreciated or market value. This depreciation is added as an expense in the financial analysis. But if you sell the item at a higher market value, then the extra amount earned is added to the tax assessable income at the end. In fact, if you sell any item of zero value after a period of time for an amount, that amount is to be added to your taxable income. Otherwise, if you lose money in the sale, add this difference to the expenses.
  21. For computers, they are written off after three years unless you buy a machine that has been specifically designed to expand or change over a period of 10 years or more.
  22. If you are in the information technology business and you do not have a receipt for any software you purchase, the original software packaging and CD is all you need to prove your purchase of a genuine software product.
  23. No single individual or group in society is one-hundred percent correct in their advice (and that includes us). We are all human and are subject to error from time to time. So give yourself enough time, talk to as many professionals as you can, and remember to get the extra help when you need it. In that way, you will iron out many of the problems you find (or not immediately aware of) in relation to any kind of information you need to make a good business decision.
  24. If you have a debt of any kind, pay it off as quickly as possible. Otherwise the interest component of the debt will increasingly slow you down from becoming rich and financially independent in the long term.
  25. If you pay your bills in an expedient manner, you can command great control over when and how you pay your bills in the future.
  26. When it comes to paying off expenses, paying too quickly can also pose a problem for you. For instance, you may discover at certain times how you may not have enough income to pay off your expenses. So give yourself some extra time. Use a business credit card to pay for things. You have 45 days before the interest component of the temporary loan kicks in. Make the most of it, then pay it off before the end of the interest-free period. It teaches you to pay quickly, but gives you time to make sure the income arrives. Remember, using a business credit card is a powerful way of paying your bills and in giving yourself time. Just be sure to pay off the credit card debt before the interest does hit you.

    NOTE: If you are looking for a good business credit card, you can't go past the American Express Business Card for Small Businesses. The beauty of this card is that there are no bank fees, no transaction limits and thus no transaction fees or interest, no credit limits (i.e. you can spend as much as you can afford to repay), and you can benefit from discounts up to 25% on business purchases such as couriers, computer equipment and hotel accommodation with the card. But do remember to repay anything you spend on the card within the interest-free period. Otherwise, you are better off not getting the card at all.

  27. You should also make it easy for your customers to purchase your products and services using a credit card. Try to look for credit card processing companies (CCPC) that don't charge monthly and/or yearly fees, and you are not required to meet minimum monthly sales volume. If you are selling online, here is what you should look for in your preferred CCPC.
  28. Prioritise your bills (i.e. pay those urgent bills now, but pay others slowly so you will have the income earned from your business to pay for them). Also spread your payments (negotiate with suppliers). Go for monthly payment deals. When you have enough income, it is cheaper to pay upfront in a lump sum.
  29. This idea of paying a little later is common with established businesses. You could find yourself creating a list of creditors and debtors for money you owe to others and money other people owe to you respectively. While this may be fine once you trust certain people like your suppliers and they trust you, be prepared for the occasional late payer in your debtors' list.

    The most notorious of all with regard to late payers are big business and the government. They are quick to ask for money, but painfully slow to pay you money when it is owed.

  30. If you are not sure how much you will have to pay for anything, find out and get it in writing. Ask to see the documents to confirm the full fees or payments that have to be made including upfront fees, ongoing annual fees, exit fees, insurance and general preparation fees. The costs should be clear, itemised and fully justified. If necessary, do some research with competitors to see how they charge for a similar product and use this information as a negotiation/bargaining tool.
  31. If you want to attract customers to your business, avoid having a regular "sale". In the 1990s, almost every business seem to have a sale throughout the year. There are sale signs everywhere you go. And people are getting weary of these so-called "sales". Hence do the exact opposite. Concentrate more on emphasising good customer service and a simple, low-cost, unique, easy-to-use, quality and reliable product. For example, try to "value-add" to a product by providing additional services like free home delivery and a money-back guarantee. And with many people getting bewildered by so many supposed sales, many are looking for advice. So mention testimonials from satisfied customers in brochures and product labels to enhance the value of any product, and/or give detailed and interesting information about your products on web sites or elsewhere to help make the customer feel like they are in control, are intelligent people, and understands exactly what you have got to sell.
  32. One of the keys to success in business is to create change through marketing to help make a profit. But the ultimate aim is to create stability for the customer so that they feel happy with the purchase and will want to come back again. Entice changes. But show stability.
  33. A sole trader does not take a salary or wage as a form of expense to the business; he/she takes a drawing from the Net Profit after Tax. For directors in a company, the amount would be a salary or wage and therefore would become an expense.
  34. Going to employ people in your business? Well, get to know your staff well at all levels. Firstly, you should acknowledge their presence. Don't hide in your office all day long and think your staff knows what to do. Staff are people too with feelings and may need some guidance and encouragement every now and then. So try to say "Good morning!" to your staff as you see them and make them feel good when they have done something well. Also get involved in whatever they are doing. If you can see a better way of doing things, make suggestions and not commands. Let staff feel like they can competently do the work and can see a better solution to things they are doing. If staff are doing the right thing, encourage them and make them feel good about it. It is about turning staff into true leaders by acknowledging their L-brain, R-brain and emotions all the time.
  35. The process of debt collection by creditors and with debtors who owe you money should be a simple one: Firstly, to pay off expenses and all your suppliers in the easiest way possible, talk to the suppliers first and ask for monthly payment options. Be prepared to pay interest as well, but at least you can pay it easier. Then start collecting money from the sales invoices. Start with the small ones and work your way to the big ones.

    Sequence of events of how to collect debt:

    1. Send a reminder at the end of the month. A letter is fine.

    2. Usually most people will pay before the end of the financial year. But if not, start getting on the phone. Ask them if they have a problem in paying the invoice. If they say "No", then you can push them to ask for a cheque. If they answer "Yes", if could be (i) they are genuinely in trouble due to reduced cashflow (in which case organise a monthly payment plan); or (ii) they are scamming you (e.g. "The cheque is in the mail!"). Ask for proof they have done what they have claimed by asking the cheque number.

    3. If you still can't collect the debt, get legal help. The lawyer will write a letter stating that if the person does not pay within a specified period of time (e.g. 14 days or 28 days on receiving the letter sent by registered post with a confirmation card), they will be marked on the list of default debtors and will be kept on the official records for 6 years. This should be enough for the person to pay the debt or organise a payment option with you.

    4. In the final analysis, a debt collection agency (a Mercantile agent) and/or legal professionals (more expensive) will deal with the problem. A debt collection agency will charge 10% of the invoice value once they have collected the money.

    If these people suddenly pay you then ask for another supply, it would be strictly COD. Otherwise don't deal with them.

  36. When running a business, you may be tempted to stop using your creativity because your rational skills are required to make money with existing products and/or services. Well don't! You should always maintain some form of creativity at all stages of your business for maximum success. That is why more and more businesses are employing intellectual property experts or auditors so they can see ideas for new products and/or services, or how to improve existing ones.

    Intellectual property includes R-brain or creativity issues because you are dealing with people's ideas. In this period of human development known as the ideas economy, this is where good ideas that are close to commercialisation are brought to the forefront of modern business and how business managers are able to stay in the game, if not ahead of it.

    We call this innovation.

  37. Finally, every July (i.e. at the start of the financial year), look at your business and see where it is going. Check your business goals, make sure you have enough cash set aside to pay the bills, work out the current market value of your business assets, find or create a new or innovative product to compete with other businesses in your industry for the new financial year, etc.



Once your business is well-established...

  1. Always put some money back into the business or into an investment account for a 'rainy' day as it were. Spend only when you need to, especially if you have debts like a mortgage. Always control your spending; otherwise you will only make other people richer and not yourself as well!
  2. You have to do more than just save money, learn to invest your money too. You must become an investor, not just a saver, in order to make the most of what you earn in your business. As billionaire J. Paul Getty once said: "It's not how much you make that counts...it's how much you keep."
  3. The world of investing is done primarily in two main areas: shares and properties.

    Think of properties as the mortar and brick assets you see in the middle of a city such as houses and land. Shares, on the other hand, are a little less tangible. It is a bit like holding money in your pocket in that what you have is a piece of paper telling you how much money you have invested in a company. But the principle is similar to property in that to get your money back and perhaps make a profit you must sell the shares just like you would sell your property.

    The only difference is how much quicker and easier you can sell your shares compared to property unless your company is doing extremely badly or has collapsed (extremely rare if you invest in quality blue-chip companies on the stockmarket). Property, however, can usually be held on for a period of time until things pick up and then you can recoup your money and perhaps make a profit as well after selling the property.

    Which is better to invest? It depends on what is happening in the market place. If you had money to invest between 1999 and 2003, you would be better off investing in property. But now that there are too many people investing in property and selling the property afterwards to make a profit will be extremely hard, from 2003-04 until around 2007, you should consider investing in shares. After that, you may wish to consider looking into property again.

    Try to see properties and shares as like the ying and yang of investing. The two come in cycles. And the complete cycle usually lasts around 10 years. Although with the advent of the Internet, this cycle may shorten as more and more people learn how to invest.

    UPDATE
    25 January 2006

    As prices for the average homes drop, houses located in more popular lifestyle areas such as near the beach or major waterway and in warmer climates (e.g. in the tropics and subtropics) as well as being close to major amenities can command increasingly high prices. If you intend to pursue properties as an investment choice, go for these popular homes. Or look for average homes in above average locations and lifestyle features and do a quality and low-cost renovation job. But remember, if you go for the more expensive homes, you will need to consider issues such as interest rates. As the Australian market stands, experts are hedging their bets on rising interest rates towards the end of 2006.

  4. Once you have worked out whether to invest in property or shares, there are another two ways to invest your money: long-term investing and short-term investing.

    Long-term investing is considered the lowest risk and the steady performer when you choose quality and well-established companies (or property) to invest. Short-term investing is the highest risk and has the potential to make you the most money. But you need to be a very good investor and have a thorough understanding of the marketplace and all the companies and properties that exist there to be successful in short-term investing. And even then, the risk of losing money could still occur (e.g. the stock market crash of 1987).

    We strongly recommend long-term investing as the preferred road to solid wealth creation. Unless you are the director of the company you want to invest in or you have a very solid knowledge of the marketplace and everything in it, you are better off avoiding all the hype from financial advisers wanting you to go for short-term investing and paying people to make your financial decisions of where to invest. Otherwise you will pay dearly in management fees and there is a strong risk you could lose all your money if you do.

  5. Consider investing some of your savings outside the business. An excellent investment option is to consider a non-active Managed (or Index) Fund where you invest over the long-term (10 years or more) in a diversified growth portfolio of overseas and local shares, government bonds, and perhaps some well-chosen property investment "growth" areas. What's the difference between an active and a non-active managed fund? The difference is this: A non-active managed fund is a place where you are not paying a lot of people to do a lot of research and make decisions on your behalf about which companies to buy or sell over the long-term. This translates into lower management fees. If you want to make money in less than 5 years, then choose an active managed fund. But for long-term investing of 10 years or more, you are better off with a non-active managed fund.
  6. Also be careful of managed funds whose management fees don't seem to reflect their performance. For example, if a managed fund performs poorly in one year or is in the red, you should not have to pay the same fee as when the fund performs better in another year. Want to know of one such managed fund following this principle? Try NavraInvest, an Australian share fund investing in the top 200 Australian "blue chip" companies. The fund implements the "reward-for-performance" policy whereby it takes no fees from investors unless the fund outperforms its benchmark, the S&P/ASX 200 price index.

    The reason why managed funds like NavraInvest can do this is because the funds have learnt to put the interests of the investor ahead of their own rather than the other way around. It is all about businesses realising why they are there and whose money they are actually using — that is, the investors. Also, the managed funds take a less risky strategy of tracking the benchmark based on the S&P/ASX 200 price index, instead of trying to get the best possible return for the investors by choosing any reasonable company.

  7. Be aware of world events and how they can affect some of the companies you may be investing in, especially if you are investing for a short period of time and want to maximise your profit. For example, the SARS virus has affected the tourism and air industry. Either stick with the investment portfolio you have (i.e. the preferred long-term investing decision), or change it quickly before the investments lose their value (the short-term investing decision).
  8. If investing some of your money in other companies, make sure you read the annual reports for each company for the last 5 years. The companies you invest must be making a consistent and reasonable profit. If, at any stage, you find a profit loss in one financial year (or the net tangible assets of the company suddenly goes down because it appears to be selling its own assets to pay off some kind of debt), look more closely at what is happening. For example, ask yourself, "Is the company's management team making appropriate and sensible changes in the following year to help return a healthy profit (and a good tangible asset level)?" Or, "Has the salary levels of top executives suddenly jumped to an exorbitant amount following the profit loss which could indicate a potential collapse of the company in the near future?". Or maybe the directors have suddenly purchased luxury cars like a Porsche for no good reason? Or perhaps the company is in need of extra cash and need to attract additional investors, in which case you should check to see whether the company is trying to look good by buying heavily in a lot of other companies. Find out then make your own decision on whether to invest in the company or move on.
  9. When choosing companies for investing, make sure the managers and directors of the companies follow the rule of full disclosure of all finances and management decisions to shareholders and investors. Any evidence of managers and directors in the companies trying to hide something, even a simple thing like changing the minutes of a meeting, should be avoided at all costs. Otherwise if you have already invested in the company and the value of your investments is the lowest you can possibly imagine, you would be better off sticking with what you have got because usually the investments can only get better at some point in the future (especially if the companies are large and well-established).
  10. The choice of an investment is depended on your financial goals. If you want financial security (perhaps because you have a lot of money and don't want to take unnecessary risks, which is quite common for people aged over 55 years), choose low-risk investments such as fixed interest funds or quality and reliable blue-chip stocks (managed by experienced directors who are not too profit-motivated). If you want your money to grow quickly, you must consider medium- to high-risk investments, which usually means looking for shares in quality companies which pay good dividends. But when investing in high-risk areas, do not put "all your eggs in one basket". Try to spread your money throughout a wide-range of different investments (both "old" and "new" economy businesses). Never place all your money in just one high-risk company unless you know precisely how your money will grow (i.e. you must be working for the company, preferably at the Director level!).
  11. If you allow other people to manage your investments (which is the easiest, known as Managed Funds), look for those investment companies with few (well-balanced and experienced) directors and staff running the place and there is little incentive to make great amounts of money for themselves through commission-based selling or introducing outrageous fees. In this way, the administration costs in the companies will be low and thus the return for your money should be good (even in the worst investment times).
  12. If you don't know of a suitable commercial Managed Fund or a good quality company with the option to provide a fully franked dividend (where the tax for your dividends is paid by the company and not yourself) and shows net of all fees and charges when investing your hard-earned money, you are better off investing in your own company and putting the rest in your superannuation fund (preferably managed by the Federal Government because any problems in the investments will have to be protected with the help of the massive tax system). Or consider investing some of the money in a structurally sound property and renovate it using the least amount of money as possible for maximum profit at sale time. When renovating a property, make sure it is in a good location, there isn't a glut of the same type of property, know the type of people and what they want in the area, and just make enough superficial changes to give it adequate value in the eyes of home buyers. When selling the property, make sure the property market is not depressed.

    NOTE 1: When shares are seen as not a good investment choice in one year, go for property investment instead. When property investment is not so good in another year (e.g. too many renovated properties being sold all at once, or people simply don't have the money to purchase them), go to share investments. See property and shares as the ying and yang of investing. The complete property-share investment cycle usually lasts 10 years.

    NOTE 2: When renovating a home, try to recycle materials as much as possible, use low-cost fittings that look attractive or expensive, and print professional renovator's business cards so you can get special discounts from local hardware stores especially if you have to buy things in bulk. When buying a home to renovate, check online databases for the prices of comparative homes in the area. Compare the prices to the one you want to buy. If it is considerably cheaper than normal because it looks run down but is still structurally sound (check with an architect for around A$400 per property) and is in a good location (check with several real estate agents), go for it. If you are getting a loan to buy the first home and pay for the first renovation, just pay for the interest on the loan, renovate as quickly as possible, and sell the renovated home. You should make adequate profit to pay back the loan and cost of renovation and still have plenty in your pocket to try the next renovation with much less reliance on bank loans. Use the capital gain from selling the home to buy another property. Repeat the process until you have earned enough profit from the scheme.

    NOTE 3: Instead of renovating a home and selling it as quickly as possible to cover all renovation, insurance, and interest costs and still make a profit (a useful tactic in centrally located city areas where people want to live and work and property prices are low in the early stages of the property investment cycle), try using your money to make a deposit to purchase several homes in outer suburban areas of major cities, or go to regional town centres outside the major cities. The aim here is to let the rent pay for the loan, insurance and maintenance costs and there should be some positive cash flow left at the end of every week. Then use about a third of the profit to re-invest in the property through basic renovations (e.g. free voucher for the renter to purchase nursery plants for the property etc). Remember, the property you buy must make money from Day 1. If it doesn't, don't purchase it. Also the property has to be popular enough among renters to live because of its reasonable location from work, transport, shops, schools or some other common lifestyle choice and still able to pay enough rent to cover your costs (how much are the average renters in the area able to afford to pay for rent?). And finally, you must do your homework of checking out the actual rent for similar houses in the area before buying the property.

    A positive cash flow is more useful to young people making a start in property investment and those nearing retirement. But if you have a stable and well-paid long-term job for providing sustantial income, a negative cash flow may be okay in which case you may wish to negatively gear your property investment.

    To work out whether the property you want to rent will generate a positive cash flow, do the following:

    1. Calculate the potential yearly income from rent minus two weeks for being vacant). For example, if you are confident you can earn $100 per week in rent, the yearly income will be $100 x 52 weeks - $100 x 2 weeks=$5,000.

    2. Calculate all the expenses such as repairs and maintenance, monthly repayments on loans, allowable deductions such as depreciation, etc.

    3. Subtract the expenses from the income. What remains left is called your savings and should be positive.

    4. Reduce the positive amount by the top marginal tax rate (usually 48.5%). The remaining figure is your positive cash flow.

    NOTE 4: If asking a professional builder to build your house or renovate an existing one, make sure the builder has warranty issurance and professional indemnity insurance.

    NOTE 5: If taking out a loan to pay for a property and make a quick renovation before selling, consider a variable interest rate loan while the interest rate remains low (below 9%, now under 5%) and there is a good chance the interest rate will continue to fall. The interest rate is usually lower than fixed interest rate. Otherwise go for a combination of variable and fixed interest rates if it approaches 9%. And fixed interest if the rates exceed 10%.

    NOTE 6: You don't have to pay for capital gains tax (CGT) if the property you purchase is going to be your own residence and you decide to sell it. You can sell your own residence at any time after purchasing it and you will never have to pay capital gains tax irrespective of the time you have occupied it.

    NOTE 7: If you are selling another property (not your own residence) or shares and you don't want to reinvest the money in another property or shares or to pay capital gains tax (CGT), place the money into superannuation where it won't be assessed for tax purposes until you reach retirement. One special note about superannuations for investing your money: don't use an unlicensed financial adviser to manage your superannuation. Some unscrupulous financial advisers have been known to set up a scam using unlicensed business premises and advertise in suburban newspapers designed to help you rollover your super fund, or place money in your preferred super fund on your behalf, or suggest to take your super money out of your fund and place them in small self-managed funds of the advisers' own choosing, or take advantage of the legislation for allowing people access to their super funds on compassionate or hardship grounds. If people follow the instructions of these dubious financial advisers, they will lose their super. This scam will become more prevalent after 30 June 2005 when people are able to choose their preferred superannuation fund (instead of letting the employer to decide for you).

    When searching for a suitable superannuation fund to invest your money, look for a fund with the least costs, flexible options and a healthy portfolio of stocks for investing. In the early stages of building up your super, you may choose a slightly riskier high gain investment option such as growth funds where the investing is done mainly with the top 500 companies on the stock exchange. When you retire, choose a very safe "low risk" investment option. Or try what some retirees are doing and put a fair wad of your money into a well-established internet bank account earning no less than 5 per cent interest. The extremely low cost nature of setting up and running internet banks without a shop front allows them to offer interest back to you at a rate better than any of the big commercial banks can achieve.

    On the cost front, be aware that advice from superannuation funds and suppliers will not be free. When taking this into account, the least expensive superannuation funds you can choose are public sector funds, followed by industry super funds with retail corporate master trusts on par with industry funds for their fee structure, and the most expensive were retail personal super funds. Now all you have to do is choose the specific fund best for you!

    In Australia, government legislation starting 1 July 2005 will allow every Australian to choose their preferred superannuation fund. For employees, you will receive around this date a standard choice form from your employer. This is a form in two parts. The first part is the default fund chosen by the employer. This is the fund your super will go into if you do nothing to return the form to your employer. If you want your super to go into your preferred super fund, the second part of the form will help you to specify your choose.

    The hardest part in declaring your preferred super fund on the form is determining all the information about the super fund to help your employer know where to send your super. You'll have to tell your employer the following information:

    (i) The name of the preferred super fund you have chosen.

    (ii) Your membership number in the fund (if you have one).

    (iii) Your account name as provided by the fund (usually it will be your name).

    (iv) The Australian Business Number (ABN) of the super fund.

    (v) Where applicable, the product identification number since your super fund is likely to have different products on offer to investors.

    Just to keep you really busy. You may also need to supply a letter from the trustees of your preferred super fund confirming it is a complying fund (i.e. meets the government regulations) and will accept contributions from your employer on your behalf as well as details on how your employer can make the contribution.

    For self-managed super funds (SMSF), a letter from the Tax Office confirming you have a regulated fund will suffice. As Andrew Lawless, technical services manager for MLC said:

    "At the moment, if you want your employer to contribute to your self-managed super fund, we believe that, for a new fund, you will need to provide a copy of the ATO's confirmation of regulation or, for an existing fund, provide a copy of the ATO's annual letter of compliance." (Hoyle, Simon. Sorting through the new-look super system: The Sydney Morning Herald. 19-20 March 2005, p.50.)

    After that, you can sign and date the form, attach the letter and any other relevant information (you should keep a copy for yourself), and hand it to your employer. Do not send it to the Tax Office or your preferred super fund. Only your employer can process this information.

    To make it a little easier, most super funds will provide a Product Disclosure Statement (PDS), or at least a telephone number or website address where the PDS can be found. This document should tell you everything you need to know.

    NOTE 8: For people investing in a property (i.e. purchasing a property and renting it so as to produce an income to help pay for the mortgage and other costs on the property), you are entitled to claim deductions in your tax return for your investment property of which the most important deduction you should claim is depreciation. When renting a property, there is always natural wear-n-tear. So use this fact to claim your legitimate deduction for depreciation in things like fittings, carpet, kitchen appliances, bed, lounge suite and so on. You can potentially save thousands of dollars in paying tax simply by mentioning in the tax return form how much things have depreciated every 12 months. But do check the Tax Office to know precisely which assets are depreciable in an investment property and for how long.

    NOTE 9: We are now nearing the end of the property investment cycle (i.e. too many people wanting to get rich by selling property at very high prices). Any property investments you have (e.g. renovations, paying off loans on a rented property) should be finalised during the 2003-2004 financial year. If you can't sell your property or pay off the loans before the end of the current financial year, you should consider locking in fixed-rate home loans now as some observers are predicting a rise in the interest rate either late 2003 or early 2004. But for those of you who can make a profit by selling your renovated investment property, try to invest some of your money in shares as this is your next option for making investments. When selecting shares to invest, choose quality and well-established companies with services and goods considered important to daily living.

    Our recommendations for quality Australian shares to make up your portfolio should include Wesfarmers Ltd, BHP Billiton Ltd, AGL, Woolworths, Coles Myer, Amcor Ltd, Milton Corporation, Australian Gas Light Co., Commonwealth Bank of Australia and Macquarie Infrastructure. If you must invest in new economy or hi-tech companies, look first at what consumers are happy to buy in the shops (e.g. plasma screens, electronic games, certain brands of computers etc) and choose the companies with ready-made and popular products on sale now.

    Or consider the Channel 9 top financial adviser Mr Paul Clitheroe's share portfolio recommendation as of 1 October 2003 consisting of shares in Qantas (a world-class Australian airline), Billabong (a strong company for meeting the needs of the young fashion conscious people), Bank of Queensland (solid management team to manage finances), Sonic Healthcare (for an increasingly aging population), Coca-Cola (now diverging into different areas), and Perpetual Trustees (a strong financial management company).

    Or why not choose your own shares? Just remember a few things. Never put all your money in one basket, read up on different companies and what they are doing, and try to buy shares when they are at their lowest.

  13. With interest rates about to rise in Australia and the boom in property investment has almost ended in 2003-04, you should be extremely careful about taking out low-deposit home loans now especially for expensive inner city houses and apartments. If you are not likely to have a solid and permanent job where you work, or the job is not paying you sufficiently to cover all the mortgage repayments comfortably, or you don't have sufficient savings in the bank to handle adversity (e.g. a rise in interest rates, unemployment etc), you could risk the possibility of defaulting on your mortgage repayments. And given how quick banks like to lend money to practically anyone these days and then take it away for any good reason just to maintain high profit levels for the banks, you would be wise not to consider a loan if there is a likelihood you may not be able to make one or two repayments. As Australian Prime Minister Mr John Howard wisely said:

    "One of the things that must be avoided is people having virtually no deposit at all, and that is what the bank is warning against." (4)

  14. When looking for quality financial advice on where to invest your money, choose the fee-charging advisors and not the commission-based agents. To know for sure whether you have a good advisor, ask him/her how they earn their money. Also ask a question that you already know the answer to. Do it every now and then when it is appropriate. It also helps you to reinforce your own knowledge and perhaps even to improve on it over time should you receive new advice.
  15. If a stockbroker or financial adviser recommends a particular share as part of your investment, they have an obligation to disclose any incentive for recommending it. So ask lots of questions, and be prepared to talk with other financial advisers before deciding on a suitable investment.

    And most importantly, always ask the bottom line of the risks and all the costs for any financial product. Any financial adviser who appears to be evading these basic questions of risk and costs or is using complicated financial terms as if trying to confuse you should be avoided. Because at the end of the day it is your money and you must be confident in the advice you receive from others.

    UPDATE
    11 March 2002

    The Australian Federal Government has introduced legislation (with a transition period of up to 2 years) requiring all Australian financial service providers (which includes banks, credit unions, building societies, insurance companies and financial planners) to gain a Financial Services License from the Australian Securities and Investments Commission (ASIC) and to produce detailed disclosure documents, such as a Product Disclosure Statement, each time a savings or investment product is sold to anyone. The purpose of this new legislation is to give people more confidence that the person they are dealing with for financial advice is actually authorised to do so and has the qualifications, and the information they provide is complete, unbiased and shows all hidden risks and costs etc. This is known as the Financial Services Reform.

  16. For Australian consumers and businesses, the following financial planners are recommended for their impartial advice, in providing advice that is in your best interest, has low overheads (e.g. minimal advertising, no commission to sales people) and hence a lower fee to you, and can continue to offer advice and service long after an initial investment has been made:

    Bridges Personal Investment Services

    Level 4, 10 Moore St, Canberra City ACT 2601

    Ph: 02 6257 1708

    Member Corporation of the Australian Stock Exchange Limited, License No.11506.

  17. If you are still not a confident investor, we recommend keeping your money in an Internet/online bank account earning a solid 4.75% interest such as ING's Savings Maximiser and Dragon Direct. Why? Well, you won't be paying for the cost of bank branches and a large workforce, so the interest rate will always remain a high 4.75%.
  18. Those investors who generally do poorly in the sharemarkets are those regularly moving from fund to fund and from company to company chasing performance after investing for a period of 3 years or less. Avoid the temptation of moving your money around all the time thinking "the grass is greener somewhere else". Because in the end you could lose too much money in brokerage fees (and possibly taxes if you receive a dividend). And you could also move your money into better performing stocks only to find the value of the stocks are at their peak. You are better off sticking to the quality shares from top "blue-chip" companies (or government bonds etc) for a minimum of 5 years and preferably for 10 to 20 years instead. Just give investments the time they need to perform and you will do much better.
  19. The usual time it takes for most people to become confident investors and can make their own investment decisions instead of letting someone else do the work on your behalf is about 12 months. If before this time you are not sure where to invest your money, choose well-established blue-chip companies or stick to a quality Managed Fund (i.e. the ones offered by non-profit organisations or stick with the government's own recommended fund). Later, as you gather more experience about how companies operate in different industries and understand their products, services and managers, you will begin to see the world of investing as not so much a gambling activity, but rather more of a science of making money.
  20. Finally, be positive in your attitude and learn to smile at this stage in your life. Yes, we know it may have been hard to reach this far, but remember you have made it in the capitalist world! You are now in the top 15 per cent of the population in developed nations, or the top 2 or 3 percent in underdeveloped nations who has fully and totally succeeded in running a business from start to where it is now and also in investing in the fortune made with dividends earning you enough to live comfortably for yourself and your family for the rest of your life.

    This is a good time to decide whether you want to keep on managing the business, get someone else to run it for you, or sell it outright to someone else. The choice is yours to make.

    NOTE: When people talk about being positive in one's attitude, don't believe it means ignoring and even creating a world that doesn't see the negatives whatsoever. Don't do it! You're living in fairyland if you think you can live in a world full of positive things only. As the world events in recent times have shown, you should be balanced in your thinking by being aware of the negatives (understand them) and positives (admire them). Then focus on beautifying the negative things (e.g. helping the less fortunate than yourself etc) and enhancing the positive things (rewarding and promoting those who do a good thing for society and themselves etc). This should be the aim of life while you are living in this universe. It is the only way to reduce the problems of the world as we see them today.



What happens if your business is in trouble...

  1. Don't be ashamed to admit it. The sooner you talk about the problem with your accountant and even your staff, the more likely a solution can be found to get you out of it.
  2. Many business operators have a bad habit of keeping their business problems quiet until it is too late and have racked up a huge debt. Well, don't! Let's face it, it is far better to close a business with a small debt than to pay off creditors for the next 35 years or more and also discover your personal reputation in running a business has been tainted for the rest of your life because you decided to let the debt build up.

    You must make a serious business decision when a debt develops in your business. Have the books organised so you can make those decisions sooner rather than later. Look at the real sales forecast and all your expenses. Can you find a way to increase sales and/or reduce costs? To increase sales, you have the power to increase the price or increase the quantity sold. Or maybe a change in packaging or features in the products you sell could make all the difference.

    When reducing costs, don't take the easy option of sacking most of your staff. Look in other areas first before affecting the lives of your employees. And if you must tackle the employee situation, consider moving to a performance-based pay rather than total fixed salary. Try to go for a reorganising of your workforce to do different tasks and sell different things rather than cutting off an arm or leg because this is how it should feel when sacking employees.

    Also, you may find it a good idea to consider having a part-time job while doing the business on the side to get that extra income, instead of spending all your time on the business. This option may be most suitable for those business operators running a micro-business as it can often take a bit of time to establish the business properly in the marketplace.

    And what about re-inventing your business? Just give your existing staff new responsibilities, tasks and access to new training programs so they can perform in the new business.

    If all else fails and the advice from employees, accountants and your friends suggests there is nothing you can do to keep the business afloat, then ask yourself is it worth continuing on with the business? Remember, a business is a business. You can always make money in a totally different area altogether if you wish, just so long as you have learned why your current business was not a success and can move on.

    Never see your business as a failure, personally or otherwise. See it as a learning experience. Just ask yourself why it happened, improve your ways of doing things, and move on. You will only get better over time.

    Did you hear about the story of the employee working for IBM who made a mistake and cost the company millions of dollars? Well, IBM management could have sacked the employee and told him what a failure he was, but they didn't. Instead, IBM management said, "Oh well, you've learned your lesson. See it as part of your training to be a better person."

    As a result of that learning attitude by IBM, the employee has remained in the company and managed to help make hundreds of millions of dollars in profit for IBM. For a few million dollars loss over a mistake to a few hundred million dollars in profit, now that takes guts and courage.

    Likewise in your business. If you have done everything to make your business successful but can't, be prepared to cut your losses early and put it down as a learning experience then move on. If you have learned from your mistakes, you will almost certainly be successful in another business you may set up in the future or any other activity in your life.

    Just show some character and admit mistakes were made. And learn from the experiences so you can be a better person. Society will always admire those who have the courage to do so.

  3. Running a small business is a way of life. If you fail in your business, some people say it can be severe. Well, yes. But it can also be a minor event. It depends on how you find ways to minimise the hassles. For example, don't get yourself into a debt that you cannot pay back. You must always have enough business assets and available cash at hand to pay off the debt. The assets must be valued at a price which when it is sold can be quickly and easily converted into hard cash when you need it. Then, combined with any business savings you may have elsewhere, you should have more than enough to pay off the loan or other debts.
  4. Also the choice of business you want to run can make a big difference should it fail. For example, a business that relies on taking out a big loan early to buy very expensive and highly specialised (and hence not easily sold) machinery, a large business premises out in the middle of nowhere, and lots of employees is likely to experience greater financial, emotional and physical hardship for everyone involved in the business when it fails.

    If, on the other hand, your business premises is nothing more than a web site, you employ very few (if any) people, the equipment you buy is very low-cost or free and perhaps quality second-hand stuff, and you run on a Just-In-Time (JIT) basis, there isn't that much hardship to you and even to others if you have to close down the business. All there is to do is remove the web site, close the business bank account, keep the equipment (probably purchased through your own personal finances), and move on. Or better still, learn why and develop a better online business, then start up again with perhaps even less expenses to worry about next time. It is all about working smarter, not harder (and more expensively).

    The choice of a business and how you will cope with difficult moments like a possible failure will depend on your expertise, how smart you are with your money, how the market dictates the products and services it needs and wants, how good is your business plan, and where you think you can make the most money in a reasonable period of time.



Life after business (believe it or not)...

  1. Now that you have established your business and have invested some of the money earned from the business, there are two more pieces of advice you should take with you: remember to help other people through charity work (i.e. without expecting a profit to be made, which balances the life of making a profit, because not everything should be given at a price, especially for the simple things we all need to survive and be happy), and enjoy life.

    You're here to work to live and enjoy life, not live to work. And always be aware of the state of the world when you do it. There are many poor people in the world. Help them and you will be able to enjoy life even more and in your own way.

    Remember, some religious people are seeing the possibility that we may all come back in our next life to see the consequences of all our actions in the present and past life. If this is true, all businesses should contribute to making this world a better place and not for the sake of making certain managers richer through excessive profit. Who knows? Today's Bill Gates could be tomorrow's child starving on some street in a third world country—and all because we did not share enough of our wealth, knowledge and resources with everyone else.

    So be good to everyone and enjoy life to the fullest. Who knows what the future may hold for all of us...