Do it Deliberately and Systematically
Let’s start this discussion by asking “what is the core role of a company director who, let’s assume, is also a significant shareholder?”
The core role for a business owner is to increase the value of their business. If they are not deliberately and systematically increasing the value of their business, what are they doing all day?
Probably just being a manager and managing the stuff that goes on all day, every day.
When the business owner goes home and announces that he or she has had a very busy day, they should be challenged with the question “you may have been busy darling but is the business more valuable tonight than it was this morning?”
You’ve heard this all before. Small business is the biggest employer in the country. Depending on your definition of “small business”, somewhere north of 80% all employees work for a small business.
If you are a small business owner, pat yourself on your back. You are the employment backbone of this country.
Your entrepreneurial streak is what offers every employee out there the opportunity to enjoy a take home pay, week after week, month after month.
You are responsible for paying your employees’ mortgages, for putting their food on the table and for clothing and housing their kids.
I was recently talking with a business owner with 23 employees. He was a caring employer and from time to time he’d helped out employees who got into a spot of financial bother, usually through their own carelessness. During a few moments of musing he got out his calculator and did a rough add up of all the debts he estimated his employees carried.
A common business saying is that nothing happens until a sale takes place. When you think this through, it’s hard to deny that it is true. No matter what your product or service is, until someone somewhere agrees to buy what you offer, your business won’t last.
I think this is true in life too. If you can’t sell your idea, thought or a proposition, then you’ll end up being a follower and contribute very little to your community. Even at home, we are all selling. Either overtly or covertly. At home we sell by inviting or by persuading. We sell to our wife why we need to stay longer at the office.
You’ve Contracted Terminal Insolvency Disease
Right now, somewhere in New Zealand, a doctor is informing a patient that they have an incurable illness and their life expectancy is now just 6 months.
It’s the worst of news. Devastating for the patient. Heart-breaking for family and friends. All humans are immortal until the reality of age or sickness reminds us that being immortal is temporary. After that, mortality strikes.
- Note: This blog has a special offer at the end of it -
Gerry Brownlee - You Can Help
In my last blog I wrote about there being no requirement to display any level of competency before a totally inexperienced person could appoint themselves as a director of a new or existing company. I said that any incompetent nitwit could form a company and there was no compliance or regulatory requirement that prevented this from happening.
I compared that to me applying on line for a heavy duty driving licence, being granted the licence and then being allowed out on the road to cause mayhem and carnage.
Compare that with appointing yourself as a director of a company...
New Zealand is highly rated as being an easy country to do business with. On one measure we are second in the world only just behind Singapore. And according to the World Bank rankings, we are rated number one as The Best Country for Starting a Business in.
Business and profit is the lifeblood of every country that uses tax to look after its citizens. In fact, is it possible to identify any tax that is not directly or indirectly a result of someone, somewhere making a profit?
Being the easiest country in the world to start a business is a great accolade. But at what cost?
Myth: I think one of the great myths that gets peddled and perpetrated by accountants and business advisors is the need to work ON and not IN your business if you want it to grow and become successful.
This well-meaning advice often comes from those advisors who have all the theory, read all the books and now think it’s pretty smart advice to pass on this cute phrase to business owners.
Fact: In my whole business career (say 40 years) I have never meet a successful business owner who doesn’t still sweat it out working IN the business. Telling business owners to stop working IN and start working ON their business is a master of distraction.
Truth: You have to do both!
Last month I wrote an article about family trusts, how they worked and would I recommend starting a family trust if you were a builder or tradesman.
My best advice was that yes, a family trust was still the best entity to own business and family assets although there was a price to pay to set up and manage a trust. The cost of trusts has to be balanced against the protection they offer. You may remember in my last article I mentioned that trusts no longer offered the tax benefits they once did.
The rules relating to claiming GST when there has been a change of use changed a while back which means you aren’t able to claim 100% of the GST when you decide to introduce an asset (say land) into a taxable activity.
Family Trusts aren't what they used to be
Once upon a time not so long ago Family Trusts were all the rage and if you didn't have one, you weren't considered as smart as those who did. Trouble was, many who did have trusts had only a vague idea of exactly why they had them. When asked why have you got a trust, most would answer that they could hide all their wealth from their creditors and that they ended up paying little or no tax.
Both these mostly mythical benefits conspired to make trusts irresistible for business owners and supposedly smart thinking people.