e3 Business Accountants, Christchurch, New Zealand

BUSINESS TIP
Family Businesses have issues

According to the University of Southern Maine's Institute for Family-Owned Business, almost 35% of Fortune 500 companies are family controlled. Family businesses account for 50% of U.S. gross domestic product and they generate 60% of the country's employment and 78% of all new job creation!  (The figures in New Zealand are even higher.) Yet the failure rate among family-owned small businesses is still high.

What are the major causes? Are they the same as small businesses run by individuals who are not related? One study determined three underlying causes for the failure of family businesses: 1) unresolved conflict, 2) failed leadership, and 3) lack of shared goals on a personal, family and business level. Some other major sources of conflict in family businesses tend to be differences over management roles, sibling conflict, financial issues, and lack of long-term company vision and succession issues.

A list of the top ten sources of business problems for the family business might include:

• Family issues such as divorce, financial crises, and health issues
• An absence of clear policies, procedures, and business norms
• A lack of documented business strategies for operations, growth and succession
• Compensation issues (salaries, benefits, etc.) not being clearly defined
• Role confusion, poor control of operations, and a lack of a reporting structure
• Lack of or misplaced talent, skills, and ability for family members
• Issues with non-family employees such as fears of despotism or favouritism.
• Communication problems due to unresolved family issues or relationships
• A lack of a unified vision for the business
• An absence of documented company values, ethics, and business philosophy

As is the case with many problems and challenges we all face, recognising and acknowledging them is the first step to effectively overcoming them.

(Partial extract from Michael Gerber)
 

TAX TIP

Trade Me and the IRD

A client came to us and asked if he would have to pay tax if he sold his coin collection on Trade Me. He had collected coins for more than 40 years and for one reason or another he decided it was time to give up. He had very rarely sold and then only to allow him to improve his collection and buy something better. As he hadn't done anything with the collection for the last 10 years, he saw no point in keeping it. We think this is a clear case where tax would not apply. Compare this with another client who regularly buys and sells postage stamps. Most years he makes a small profit and he always aims to do so. We think his gains are taxable. IRD is after people who aim to make profits out of trading on the internet. If you sell things you don't want, like the coin collector; no problem. If you buy goods, with the intention to sell at a profit, the sale will be taxable income and the cost of the goods will be deductible against it.

MARKETING TIP 
A reminder about what it really is
Marketing is the process of planning and executing the development, pricing, promotion and distribution of products and services to targeted customers. Using this standard, say TEC marketing experts Mitch Goozé and Jack Harms, everyone in your business is ultimately involved in marketing in some way -- not just some narrowly defined "marketing department."

Marketing-oriented organisations focus like a laser beam on customer needs and wants. They anticipate demand. They enlarge demand through promotions and advertising. Then they satisfy that demand.

Unfortunately, too many companies either don't understand this basic principle or lack the resolve to see their strategies through to completion. In fact, many businesses start thinking about marketing campaigns only after sales have begun to sag.