The #1 Challenge For Most Entrepreneurs

For most business owners/entrepreneurs, their biggest challenge is scaling their business. Now, a lot of people don’t understand what scaling really means – the goal is to build an asset.

Just to be clear on this, you’ve got an accountant with you, so you’re going to be having a balance sheet discussion with them coming up very soon and to discuss pre-tax planning, if you haven’t already done so. When we’re talking about an asset, think of it like a property asset for a moment: you’ve got a house, you’ve got a building that you invest some money, you may invest some time, put some energy of some sort into it, then over a period of time it will be giving you a cash flow. It will give you something else off the back end, and there will hopefully be an increase in the value and the valuation of the property. That should be the same for a business as well, because the goal is to build an asset that can run independently of the owner.

Now I know someone’s going to say “But I love what I do, this is what I was meant to be doing, I’m going great.” That’s perfect, you can still do it, but the difference is you don’t have to do it. You do it because you choose to do it and you only do the parts that you want to. And here’s the kicker, this may have a little bit of curry powder with it so bear with me on this one: until you achieve that, you’ve really just got a job. It could be a very high paid job or it could be a low paid job, but just understand that it’s still a job.

Watch the full webinar replay at https://learning.benwalker.com/courses/how-to-navigate-2021

Why Acquire A Business?

I was speaking with a business owner recently and we’d had discussions around prepping for exit over a few months, and I’d just mentioned acquisition, and he’d been thinking about it anyway. So last week, he spoke to me and he said, “Do you know what? I’ve decided to put on hold exit for another six months, because I just decided I’d been looking at this business that was really a simple thing to acquire, and I’ve suddenly realised, I’m selling for a four-times multiple at the moment”.

When we talk about multiple, we’re talking about the way to value business. But one of the ways to link to the way to value business, it’s always some sort of calculations, so that might be profit or EBITDAR, multiplied by a number. And that number that we multiplying it by, we call the multiple. But the point is it’s not just the profit that drives value – It’s the multiplier that you add to the profit, and it’s a game changer.

This is a powerful example of adding value by looking at your multiplier. So what this guy did – who’s got a really good business and he’s looking at a multiplier for around four, maybe five – he realised that he could buy this business for a multiple of one. He knew, and he calculated it straightaway: he can buy that business for a multiple of one, roll it in, and when he sells it he’s now going to get an uplift in that acquisition from a multiple of one to a multiple of four or five.

That’s an immediate uplift in value.

I like to think of it like this: when we were kids, we probably played Snakes and Ladders – you’re rolling the dice, you get four. You then move your piece along four squares. Then you roll a six, and you’re slowly making your way there. If you land on a ladder, you skip rows.

Watch the full webinar replay at https://learning.benwalker.com/courses/acquiring-a-business

Let's Talk About The Tax Impact Of Covid Stimulus Measures

Lets talk about the tax impact of COVID stimulus measures.

There were two main stimulus measures which were announced last year, one of which was the “cashflow boost” – that’s if you employ someone including yourself. Certainly it didn’t really matter as long as the business employed someone, then you’re entitled to what they call the “cash flow boost”. Now, that was anywhere between $20,000 up to $100,000, depending on how much pay-as-you-go tax that you withheld from your team members.

The great thing about this measure is there’s no income tax on that amount – It’s not assessable income, which is amazing. So if you’re one of the people who received $100,000 boost and think that they need to put $30,000 aside for tax, you don’t need to.

The second one here is JobKeeper – there is tax on JobKeeper. So the thought process there is you had the expense of wages, you had income to supplement that. And so you net the two off so that there is tax to consider. So the JobKeeper amount does actually count towards your other income for the year.

Quite frankly the JobKeeper essentially, it’s a supplement to your wage bill. Now, if you receive $100, you pay $100, you pay no tax – It’s in and out. But if you receive $100 and then you pay $100, but then because of that, you receive more income on top of that, that’s what is taxed on it.

So it’s a bit confusing when you say JobKeeper is tax but really it’s the outcome of supplementing your wages creates more profit because you have less expenses for the year, essentially.

Learn more about Tax Planning and the 12 things you need to consider to legall reduce your tax bill in 2021 – Visit https://learning.benwalker.com/courses/TaxPlanning2021

Why You Shouldn't DIY Your Bookkeeping

Business owners shouldn’t DIY their own bookkeeping. Similarly, I’m not the best person to go and rewire my house for electricity or the wires. I’m probably going to end up killing myself if I was to do that, or harm my family, or the house would burn down at some stage.

So I want to encourage you, if you’re DIY in your bookkeeping – yes, we might have given you some guidance on that, or you might’ve done a course or something like that – but DIY is one of the worst things you can do as a business owner when it comes to bookkeeping. From an element of, “you’re not the best person to be doing it” and “you’re probably not a trained bookkeeper either” – that’s one element of it, and the other element of it is the opportunity cost.

So, we had a client who was a doctor. In an hour, he could easily earn $120 to $150 if he was seeing patients. He was doing his bookkeeping, which you can outsource for much less than that. If we look at opportunity costs, it would pay for itself if he was seeing clients instead of doing his bookkeeping, and it would probably be more accurate. So, it would save rework or more expensive bookkeeping or accounting fix ups.

So please keep in mind, do not DIY your bookkeeping. If this stands out to you to say, “Hey, I’m kind of doing that, if I was honest with myself,” then please consider doing something about it.

Learn the 5 steps on how to take Total Financial Control. Watch the full webinar replay at https://insp.red/TFCreplay

How To Know If Your Product Will Sell

It is totally okay for you to go out there with a product that you’re learning how to do – and the way to do it is really, really simple: it’s signal. Don’t put any more work into it. Don’t say: “I need to get the web page right” or, “I need to have the flyer and the brochure ready” or any of that. It’s a waste of time right now, and It’s the wrong strategy or the wrong step at the wrong time. What you want to do first is signalling/beta.

Think of the people that you think are going to be the ideal clients for your product. Whatever the messaging system you use in your business, for instance social media, the more public the forum is the better it is, wherever that pool of people, you need to put out a message – and it’s something really simple as:

“Who would be interested in…”

Or another way to say it,

“I’ve been asked how to do” whatever the financial product outcome is, and I’m going to assume that people have asked you this. “I’ve been asked, a lot of people ask me, how do they supersize their super, and we’ve got an amazing strategy that we’ve been using that gets a 120% return over 3 years. Would anyone else be interested in learning how to do this?” So you put it out.

Now, the reason I say a public forum is it’s a thing called social proof. If you have social proof, then there’s a whole stack of people who are looking at this and go, “Wow, this is cool. We love what Meg’s doing on this sucker here.”

And we go, “I want in.”

Then you go, “Great. What I’m doing is I’m going to be running a beta group.”

If they’re interested, then you go, “The second step is…” And then you would do more of a presentation: this is what it’s about, and this is what it looks like.

Start with a small number – let’s say somewhere around 10 is usually a good number to start with. Say, “I’m looking for 10, only 10 people. Now, part of the caveat on that is that we’re going to be building this together, so you’re going to help me to co-create this along the way.”

And that is how a whole stack of our members last year created a whole heap of spinoff products and made a heap of cash. And now are having businesses that they love a lot more than they ever did before.

Watch the full webinar replay at https://learning.benwalker.com/courses/how-to-navigate-2021

The Wrong Business Structure Will Eat Into Your Profits (Sharon Cliffe Podcast)

Sharon: When setting up your business, it’s so important to ensure that you’ve got the right business structure to set you up legally, so that you don’t come into any pitfalls and leave yourself open to any kind of legal issues. It’s also important to make sure that this is set up correctly from a tax and profit perspective. That’s probably something to really look at and speak to someone about (like yourself or one of your team) and make sure they’ve got that structure right.

Ben: That’s a good point, actually – tax is often a huge component. You’ve got to pay tax on profit, so the profit is not all yours. However the amount of tax you need to pay, varies depending on how your business is set up:

Sole trader: You might pay up to 47% in tax in Australia, which is almost half of your profit,

Company: Company tax rate as a business is sitting around 26% as a flat rate of tax,

Trust: If you’re structured as a trust, you get to choose who you give that profit to. It could be you, it could be to other family members who are on a lower tax bracket than you – so you might pay even less than the 26% company tax, so it does make a huge difference.

Over the years, we’ve saved our clients close to $12 million in tax, which is huge. But the biggest impact on that number has to do with the client’s business structure. So, yeah, getting your business structure right is extremely important.

Listen to the full episode of this interview at The @SharonCliffe Podcast at https://podcasts.apple.com/au/podcast/ben-walker-the-3-keys-to-wealth-creation/id1555815785?i=1000512309094

The 2 Ways To Treat Business Purchases

When we look at purchasing things in our business, there’s kind of two ways to treat them:

The first, is if you’re buying consumables, where you might use them in the work that you do -for Accountants, it’s a little bit tough. We might be consuming pens and stuff as we work – but let’s say in the context of building a house there’s all that equipment, all the timber, all that goes into building a property. So, for a builder, they can instantly claim that stuff as the cost of the goods sold, or in the case of paper and pens at Inspire, we claim that as expenses. So, they’re not assets. Once they’re used, they’re gone. So that’s one lens to look through.

The other one is if you buy a piece of equipment (and we often call that an asset that you’re going to be using over a long time to sort of make money off in your business) generally, we can’t write that off in a single year. In accounting land and tax land, we usually have to write that off over a number of years.

When COVID hit, they announced an interesting measure where it said that there’s a temporary full expensing of any asset that you’ve purchased, which I’ve never heard of in my working career. It basically says if your turnover is under $5 billion, then you can claim the full cost of an asset up to 100% of its cost. Now that includes things like (and I’ll do an asterisk on cars) but cars, equipment, machinery, printers, laptops – not necessarily the timber and steel I mentioned before that builds the house, but the equipment that you use to build the house. So there’s no limit now on the amount you can spend, and that was eligible from the 6th of October 2020, through to 30th of June, 2022. So we’ve got just over one full financial year to use this, almost like a concession, or temporary full expensing. So it’s pretty cool.

What Should You Track In A Logbook After Buying A Car?

My recommendation is you use some sort of app to track your logbook for ATO reporting purposes. Inspire’s app – which can be found on the app store (link in the bio) actually has a log book feature that can also track GPS and do kilometre tracking for you.

What you need to do is set up a start date for your 12 weeks, and just make sure you log your business trips and the kilometres associated with them, versus your personal. Then, what we look at is your business kilometres for the whole 12 weeks, and divide that by your total kilometres in that 12 weeks. That’s how we calculate your log book percentage so that we can claim all your depreciation, GST, and expenses to run it.

Need a second opinion? Book a zero-cost strategy call with an Inspire Accountant.

Are you properly protecting your personal assets?

Recently, on the Reimagining Healthcare podcast with @YianniSerpanos, I answered the question “When should somebody be thinking about asset protection when starting a business?”

There are a couple of things to consider. When you have a director of the business (the person running the business) we actually don’t like them holding any personal assets in their own name.

Let’s say the business is sued and they’re successful. Then they end up suing the person personally. We don’t want to have that family home lost or any other investments in their own name. As an example, that can all be structured through a spouse’s name or in company or trusts that are set up well for the family.

The second part is also making sure your estate planning incorporates all these things. Estate planning is more than just a will. You need to consider what happens with company assets, trust assets and what happens with the super.

In terms of a good time to have that all in place, you should absolutely have that in place before you go into business. And, you need to check that it still makes sense as you start setting up all the structures and running up a business as well.

It’s quite complex stuff. You need to be working with an accountant who understands all this. They don’t need to do the actual estate planning themselves, but they definitely need to understand and work with the lawyers on how it all works.

Listen to the full length of my episode on the Reimagining Healthcare podcast with @Yianni Serpanos

If you need to have a chat with an accountant book in a strategy call at https://inspire.business/chat/

2 Key Pieces of Advice For SME Businesses in this Challenging Time

1) Make sure you have a plan for cash flow If you don’t already have a budget or forecast, make sure you go and do that for the next 3 to 6 months.

We’ve been helping our clients with this through our “Emergency Assistance Meeting” ( https://calendly.com/inspireca/eam ) and we answer the question, “When are you going to run out of money?” We had a client a couple months ago and the answer to hers was September. So if nothing else changes, her sales have dropped, she’s in hospitality, but she’s still allowed to do takeaway – if she keeps as she is, then she’s going to run out of money in September. And knowing that for her, she has peace of mind that she’s fine for June and July. Then, it gets a bit hairy in August, September, but she might be able to organise some other things before then to help her extend that date even further.

2) Make sure you keep communicating with key people to do with your business.
Now, for me, that’s clients and team. So, have you communicated that you’re business as usual, or are you working from home and what does that mean for clients?

Now, as business owners, we’ve got this huge responsibility we feel for our family. This also extends to the families of the people that we employ – they’ve got their own stresses and challenges throughout this time as well. One of them could be fearing job security. So just like we’re talking about certainty around cash flow, work out what’s happening with your team.

Now, talking to your team is probably going to end in one of three or four ways –

Standing them down;
Making them redundant;
Firing them for whatever reason;or
You’re going to keep them on, it’s business as usual, and they’re not going to get pay cuts.

What you need to reinforce with them as early as possible is what’s happening to the business and how it’s going to affect them. Are they losing their job? Cool, then they can go and move on and deal with that. Is it business as usual? Cool. Take the relief off their shoulders so they can get on and be productive in what they’re doing.

Communicate early, communicate often. People are looking for connection and direction.

Watch the full video with @SimonBell on the Zen Business podcast – https://www.youtube.com/watch?v=IH_K3yzQ_Rs&t=706s