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10 Tips of Building Your Business.

Article by WealthSafe.

Date Published: 15 Jan 2014

EXCITING NEWS!

In this month of January, I will be giving you tips on how I’ve built my business from scratch over 10 years. Talking from a lawyer and accountant’s perspective, as well as a business owner (and marketer). I will share the basic principles I’ve used for myself and my clients, as well as the mistakes and trials I’ve gone through. Over these next few weeks, I will be sharing 10 tips on how to build your business, including practical ideas and ways to simplify what you do.

10 Tips

DISCLAIMER: Implementing strategies to build your business requires professional advice as there are exceptions to every rule. These principles are shared from my own experience, as well as what I have seen work from my clients. Always get professional advice where you are unsure.

Tip number 1: Have a compelling “why” or “reason” or “call” which drives you, and gives you an anchor in the hard times

One of the biggest reasons I see businesses fail, or start stagnating, is the business owner has lost their inspiration, or “why”, the very reason why they are doing it in the first place.

A business was originally defined in some old court cases as a “vocation” or “calling”. First, your business has to be your calling … the thing giving you an identity in the world.

To explain further, it is easy to think of a minister or reverend as a calling, but being a retail store owner, an online education company, massage therapist, lawyer, or financial planner is not traditionally seen as a calling. Yet a massage therapist can find great joy in helping his or her clients relax, or get pain relief. For them, it’s a service or gift to people. Or a financial planner who loves his or her work and business may be driven be a deep desire to help people financially succeed, and have a secure retirement, as they saw their parents struggle through poor financial decisions, and don’t want others to suffer the same way. A lawyer can be passionate about justice to help his or her clients get what’s fair.

Simply, you must have a deep and compelling “why”. The “why” is what anchors you when times are tough, and you want to throw in the towel. I can assure you without a clear why, when times get tough, and inevitably they will, you will quit and go back and get a job.

I love the way it was put in “The Richest Man of Babylon”, one of my favorite books … “do you have the soul of a slave [employee] or of a freeman [business owner]?” (emphasis added)

One of my favorite teachers, Doctor John De Martini says if your profits or revenue have stagnated or stopped, it is because you are no longer inspired about what you do. He recommends you sit down and write down all the things that inspired you and do inspire you about your business until you can feel the joy in your heart, and tears of gratitude once again.

From my own experience, when I lost a business some years ago, which was emotionally and financially devastating, it was my dream to build a business and be of service which kept me going, learned my lessons, and came back from the ashes. Even today, I am always asking myself if I am loving what I am doing, and if I am not, I either find a way to love it, and get inspired again, or else, find a way to get rid of it, or get someone else to do it. I hate paperwork and administration, but I can see the big picture when I do it, plus I have staff now to help me. However, there was a time in the early years I did all my own paperwork and bookkeeping, and even enjoyed it!

So get your why and your reason for doing your business clear, and watch your revenue start to grow!

Tip number 2: Be a good marketer

Everything we do in life is about marketing, selling, or persuading people to engage with us in some manner or form. When a guy asks a girl on a date, he is marketing … he is seeking to convince her that she will get emotional (or other) value from going out and spending time with him. For parents, getting their kids to help with the housework is a marketing exercise (mind you, many parents prefer the Hitler approach, make them do it, or else!)

In business, marketing is everything. You are seeking to convince your client to buy your product or service and to buy it from you.

As Mal Emery says, we are living in a world where there is so much clutter in letterboxes, email, TV, it is hard to stand out. Therefore, to have a successful business, you must learn to be a good marketer. Robert Kiyosaki in Rich Dad Poor Dad says it is one of the four pillars to build a successful business … and it is one of the four skills you must go out and learn.

I have always been good at persuading people … my challenges have come around building systems! (I am more a creator than an implementor, most people tend to be one or the other) However, I’ve still had to put significant investment in learning about marketing, how to better use Facebook, and Linked In, write better sales copy for my emails, the psychology of people, etc. I once even paid a guy a lot of money to help me write better PowerPoint presentations for when I sell on stage, and I once paid Mal Emery close to 6 figures to help me improve my selling. And it’s paid off handsomely, many times over.

So if you find it hard to persuade people or sell your products, learn fast. It doesn’t mean you have to do everything if you’re the shy quiet type, and you can always pay others to do it for you. However, we don’t always have that luxury when starting out in a business, and in any event, you must know enough about it to ensure whoever you hire is doing a good job.

Tip number 3: Have a product or model that works, and don’t be afraid to get critical advice

It’s easy to start a business doing something you love, or you believe people you want.

However, a product is like fishing bait. Just because you like chocolate and put it on the end of your fishing line doesn’t mean you’ll catch fish, and in fact, I can assure you that you won’t! Fish want fishing bait. Likewise, you need a product or service the market wants. If not, it doesn’t matter how much you like the product or service … nobody is going to buy it. By contrast, as I have found from my own experience, you can sell a product that you don’t like or use yourself, but yet the market loves it.

In that sense, business is counter-intuitive, ie. the thing you feel or believe isn’t true, whereas the thing you believe doesn’t “sit right” often works spectacularly well. It’s why you test everything and see what the market wants, and the only way to gauge this is to put out the bait and see if they bite.

One good example years ago was an internet page that sold particularly well. Very simply, it was ordinary. It was a page of text and a couple of pictures, hastily put together. However, as it turned out, it was selling a product people liked. On top of that, when I asked people what attracted them to the site, they all said it was simple and easy to read, whereas many other sites “lost them”. By contrast, a friend who had a gorgeous $20,000 website was not getting a lot of hits, because people were getting confused and lost with all the fancy pictures and links on the page.

A classic example in this modern day and age is life coaching. A lot of people love the idea of being a life coach and making money from it because it feels good. Yet few life coaches make any money because the market is saturated. In the eyes of much of the market, it is “flaky” and superficial compared to seeing a qualified psychologist, psychiatrist, or therapist.

A further example is video libraries. These are fast becoming obsolete with the move toward online movies. If you came to me saying you were considering buying or starting a video library, I would be counseling you against it in a hurry, unless you were doing something quite radical or unique.

One of the reasons I like being an accountant and lawyer is because as they say, the only certainties of life are “death” and “taxes”. As a lawyer, I deal with death because I do estate planning and wills, and people will always be needing those. As an accountant, I deal with taxes and helping people with finances because we’ll always have some kind of taxes, as well as people needing help with finances. Hence I know any products around there will always have a market, provided I know how to sell.

In summary, get your business model looked at closely to ensure it works.

Tip number 4: Build good systems in your business

This has been my biggest challenge on a personal level.

You can have great marketing in your business, an amazing product, a multitude of buyers … and yet … if your systems suck, and people continually get poor service, it will eventually implode.

MacDonalds are KFC are classic examples of this. They sell a product that people like (quick and easy food) and to be honest, the food is very ordinary. Yet the system is flawless … you get the same look, same feel, same food and experience every time you go there. You get stability and certainty. From what I understand, everything to the time in the oven, the way the food is wrapped, is all written out. You can get fired simply for not putting food in the oven for 30 seconds and ignoring the procedure.

Michael Gerber in “E-Myth Revisited” says every business owner needs to play 3 roles … the entrepreneur (marketer, dreamer), the manager (the system builder, who watches the process) and the technician (ability to do the service, deliver the product).

I lost a business years ago when there was huge demand for our product, our marketing system was working life a dream, and within 2 years we had a near-record turnover for our industry  for starting from scratch. Yet the business failed. And very simply, it was because the systems were so poor and neglected (I had believed erroneously if the demand was there, and marketing and sales system worked well, the rest would take care of itself) that customer service and product delivery broke down so badly we were losing customers as fast as winning them. On top of that, our process was so inefficient it was taking staff much longer than it should to find customer invoices, departments not communicating. Eventually it all imploded and it took me a while to rebuild myself.

These days, my business is smaller, and the marketing takes a lot more work, yet we are making much better profits simply because we have good process and systems. We have a good Customer Relations Management (CRM) system, as well as overseas staff who do a lot of our back end.

Tip number 5: Keep good records

I cannot stress this one enough.

Very simply, if you have messy receipts, and poor paperwork, you will waste a lot of time looking for paperwork, or invoices or receipts. This can especially cause problems when seeking a bank loan, or credit card, or when it comes to tax time and you have to see your accountant. Even worse, in a tax audit, as an ex ATO auditor, as well as having been audited myself, the ATO treats you far more favorably if they see you have good receipts and a really good record keeping system. Indeed, I have seen clients with excellent receipts and records walk away clean and scot free in a tax audit, no adjustments, and I had the same experience in my own tax audit.

Another very good reason is the bankruptcy rules if you get sued or get into financial trouble. If you have kept poor records or no records, and it is not possible to trace certain transactions, the bankruptcy law deems you to be insolvent. The effect of this is you have longer clawback periods (when the authorities can force you to give up certain personal assets which would otherwise be protected). Having also gone through a lawsuit myself, I can assure you keeping good records and paperwork is your salvation when things go wrong. And statistics show nearly every business suffers a lawsuit or tax issue of some kind.

What I have found good is using Dropbox or Google Docs to keep records and paperwork. I spent many hours scanning every financial document and receipt into Dropbox (ranging from my trust deeds, to superannuation and insurance documents, to receipts for business). The result is, recently, I went for a car finance loan for my business, and was able to get together all the documents for the finance broker in less than 30 minutes because it was all online and easily found and could be emailed!!! Similarly with my yearly superannuation fund audit, it takes me only 15 minutes to get the documents to my own accountant (yes I use one for my own stuff even though I am an accountant!) because I keep all my bank statements and other investment statements in Dropbox where it can be easily found.

Finally, I suggest a good bookkeeping software so you can keep an eye on your numbers, and get financial reports in an instance. In our business, I use XERO online, which I think is fantastic. However, I used to use MYOB, and many businesses use MYOB and Quickbooks. There are other solutions (such as BankLink) which you can use if you find things too difficult.

Tip number 6: Always lodge your BAS on time and keep on top of government compliance obligations, especially taxes

Did you know according to statistics the biggest reason most businesses go broke or get into financial trouble is a failure to manage their government compliance obligations, especially their BAS?

If you go down to a courthouse one day, you will be shocked to see how many cases involve the Tax Office versus some poor company who failed to pay some tax, and who the Tax Office is seeking to liquidate (meaning close down) for that reason.

Very simply, many businesses have the Tax Office last on their priority list. So when they pay their staff, they know they should put away the PAYG group tax. But they don’t. Or they charge GST, but don’t put the GST aside. Suddenly the Tax Office hits them with a $10,000 or $20,000 bill for the quarter to cover PAYG or GST. And they don’t have the money. And if they don’t pay it, the Tax Office can chase them for the money, and if they fail to pay, they can wind up the company.

Even worse, they can often go after the business owner personally. Which is why, as a business owner, you must be carefully structured to protect yourself if this happens. More importantly, you have to understand the laws and how they work, because how you manage your compliance has a lot of say on what happens to you as well.

One very insidious rule which came out in June 2012 was the new company tax PAYG rules. What this means is best explained by an example.

Assume there is a company which runs an online product business owned by Jack and Mary. It makes $500,000 turnover per annum. However, the company owes $100,000 to the ATO on their BAS because they have not got around to lodging their BAS statements, and finally did. To their horror, they discovered they owed $40,000 in GST, $15,000 PAYG group tax on wages paid to Jack and Mary, and $45,000 PAYG group tax on wages paid to staff. On top of that, Jack and Mary never paid superannuation for their staff and owe about $30,000. But they have $60,000 cash put aside in a bank account in their private family trust.

Under the rules, because they have not lodged their BAS, they can be personally chased for all the PAYG tax by the Tax Office. If they close down the company, they can get rid of the $40,000 GST but the remaining $60,000 PAYG tax, plus the $30,000 superannuation they have to pay. Whereas if they had lodged their BAS, they can get rid of the $45,000 PAYG tax debt on staff wages as well. Even the $15,000 PAYG tax debt to themselves, the ATO may or may not chase them. So they may choose to close down the company, pay out the superannuation from their private cash, and start afresh (NOTE: it is very important you get advice from a professional before doing this, as there are very strict laws against companies doing this unless certain rules and protocols are followed, and you can end up being prosecuted in a worst case scenario if you don’t do this properly).

Finally, lodging tax returns late can not only result in heavy fines, but in worst case scenarios, result in prosecution. And penalize you from building wealth because most lenders always ask for your tax returns. So make sure you are diligent in lodging on time.

In summary, never ignore a notice, and always lodge your government compliance on time!

Tip number 7: As much as possible, stay on the good side of the regulators, but if the regulators become unreasonable, don’t be afraid to fight for your dream

In a world gone insane with regulation, where people are seemingly no longer responsible for their own actions and choices, most businesses are subject to some kind of government regulation.

As much as possible, you want to be on the good side of a regulator. Even in the Bible, it tells us to “honour our governments”. In principle, regulators are there to ensure things are done properly, and in their basic principle, regulators are there for our good. For example, consumer affairs laws were introduced to give people remedies against unscrupulous companies who would take advantage of customers, and rip them off, or use their power to exploit people.

Sadly, many regulators have abused the trust, and we have so many laws it is hard to know which is which. Not only that but many businesses have their own internal regulators who are even worse than the government regulators! To take some examples:

  • Medical Association to regulate doctors
  • Chiropractors Board to regulate chiropractors
  • TGA to regulate medical products
  • Legal Practice Board to regulate lawyers
  • ASIC to regulate financial advisers and almost everyone else
  • ACCC to regulate companies and protect consumers

I always say if a regulator comes at you with a request, or you have failed to lodge a statement, just lodge the statement. Recently I had a client who had failed to lodge a Statement of Affairs which you lodge when you declare bankrupt. He had fought over it. I simply told him that he had gone bankrupt, it was a requirement, he could be prosecuted, and he would be silly not to lodge it.

By contrast, to take ASIC as an example, they have often picked on big corporates on minor issues. What I have admired about guys like Andrew Forrest (CEO of Fortescue Metals) or Gina Reinhardt (Australia’s richest woman) is although they have never been silly about it, they have refused to bow to the Regulators, and have had some sensational wins over them as a result. Even recently, I had a client who was hounded by the ATO over an unfair debt that would have ruined them financially, and we addressed the matter with the ATO, who eventually backed off. The result was they saved themselves financially, and were able to continue on without a blow to their dream.

As many of my friends and clients know, I have had my issues with regulators in the past, and indeed, I’ve deliberately taken on certain matters! Usually, it’s gone smoothly, because I have always co-operated and sought to make it smooth. By contrast there have been some instances where the regulator was unreasonable and when I took a stand and was firm, and was clear I would fight them, I noticed their attitude changed considerably. And it enabled me to continue with my dream.

So in summary, always co-operate with a regulator, and don’t do anything silly, but if they are doing something which is clearly unfair, and which can ruin your dream, be willing to stand and fight.

Tip number 8: Life is about balance and so is business

When I was young, I was always told I was an extremist. My mum always said “Warren, you don’t need to go like a bull out of a gate, moderation and balance is the key”.

I didn’t appreciate the wisdom of that statement at the time, but these days, I live my life by it.

In business, balance and moderation is especially important. There are a number of delicate balances you need to keep as a business owner.

Firstly, there is the work life balance. You go into business to find some freedom from the rigidity and prison of a day job, often to find you are working harder, with more responsibility for less pay. So although in the early days there is some inevitable sacrifice and extra work to get a business off the ground, if you are still working 80 hours per week for less pay 5 years down the track, there is either a problem with you, with your business model, or with the way you’re running your business.

Secondly, there is a balance between being too planned, and detailed. This is especially so in the early stages when things are evolving, and taking a “ca sera sera” (“whatever will be will be”) mentality. I look at it this way. In the early stages, a business evolves, and you have to be flexible and leave room to move, as you’re often not entirely sure where you’re going. But as you move beyond business infancy, you won’t grow to business maturity without planning, budgets and detail. So just like an adult has to be organized and planned in their daily life as they have much responsibility, while a child can be more carefree and enjoy the basics of life, as your business grows, you need clear plans and direction, as well as ensuring you manage the responsibilities and stay highly organized and efficient.

Thirdly, there is a balance between getting your hands dirty and doing things you don’t want to do.

On the one hand, when you start a new business, or wanting to grow a business to the next level, you need to jump in and get things done. For example, if you are starting a small business with minimal cashflow, you may need to do the bookwork yourself when you hate paperwork. You may need to get out and find customers, and do marketing, even though you’re terrified and a quiet reserved type who prefers to sit in the back office and do paperwork and administration.

On the other hand, you don’t want to do stuff you hate for so long you only end up with a job worse than you had before, with the most ruthless boss imaginable (yourself)! There must be a limit and deadlines when you need results before you consider changing what you’re doing, or letting it go.

The balance is once revenue starts to grow, and you get to the stage of healthy profits, you can begin to outsource the tasks you don’t like doing so you can focus on what you do best.

In my own business, when I started 10 years ago, I originally did everything. I ran my own law firm and saw the clients, did the marketing, built a system from what I’d learned from my boss, drafted the wills, did the binding and administration, did my own invoices and my own bookkeeping and BAS statement! The first task I outsourced was my bookkeeping, BAS and invoicing, when I hired a part time bookkeeper. The second task I outsourced was legal research jobs and setting up structures when I hired a law student to help me out, as I had an excess of jobs, and I couldn’t handle the workload. By freeing up some of the administrative tasks, I was able to sell more freely.

The great thing now is most of the jobs I don’t like doing are outsourced, apart from a few. I focus now on speaking, winning clients, finding solutions to problems, writing articles (like this), creating products to educate clients, and doing complex legal and tax planning jobs. This inspires me, I enjoy it, and it is the most profitable use of my time.

In summary, be willing to get your hands dirty and work hard to grow your business. At the same time, make sure you have a plan to delegate things which don’t inspire you, so you can focus on the things which do inspire you, and make more money, and get more free time.

Tip number 9:  Use budgets wisely without being too anal

One of my mentors once told me … building a business or making money is easy. Just make sure you have more money coming in then going out! (I heard Richard Branson say the same thing when speaking on stage at the Financial Education Summit in Melbourne in November 2011.)

Sounds simple I know. Yet in reality, most of my clients hate budgets and feel restricted in their finances.

When we see all this money coming into our business, it is an easy temptation to want to spend it, get excited, and go and buy things. There is a natural desire to spend, have lifestyle, be a consumer.

But if our expenses consistently exceeds our income (as is the case with a lot of people today), we are fast on the way to bankruptcy, to going broke.

Budgets are a critical tool to grow a business. Again there’s balance.

On the one hand, you need a budget to estimate the money coming in, to work out expenses are owing, and what you have left over to spend, save, and do whatever. Or to see if there is a shortfall, and whether you need to either make more money, or cut expenses (or do both). Even recently, in our business, we did a radical cost cutting exercise in our budget for 2014 because we saw the profits were not what I wanted to build my wealth, and lifestyle.

On the other hand, being too anal with a budget can sometimes prevent manifestation, as there is this magic law of faith where stepping out when all seems lost can often be the catalyst to turn a business around. I can remember in 2006 when I wanted to grow my business to a new level, we were looking for months for an office which fitted into my budget, and kept hitting brick walls. Finally for fun, we looked at a luxury office which was 3 times higher than my budget allowed for … and both me and my business partner felt this was the right place and feel for what we wanted to build. After a lot of anxiety, fear and analyzing, we took the step of faith, and never looked back as our business grew exponentially, and opportunities started flying in thick and fast.

As a final tip on budgeting, don’t get too complicated. You don’t need fancy software. Our company just uses excel spreadsheets every month. My experience is it suffices.

Another important point is the need for financial reporting. If you don’t know how to read financial statements (ie. profit and loss statements, balance sheet), or think “what the … “ when I say that, you need to get yourself educated fast and get some reporting software. Being able to see what your business is earning in a snapshot, and how much you owe, is critical to ensure you can meet your expenses comfortably, reduce stress, and plan your growth. This is why I recommend a good software like MYOB, Quickbooks or XERO to run your business from.

In our business, I have financial reports given to me every month as to what sales were made, costs were paid out, and what the profits were.

In summary, make sure you keep a budget for your business, but don’t get so anal you miss taking important steps of faith. And do proper financial reporting.

Tip number 10: Aim to build passive income, but realize there is no such thing as purely passive income, so stay hands on and involved at all times

In this modern day and age, everyone is trying to sell you a “get rich quick” scheme. People fall for it left, right and centre because in our nature, we tend to be greedy and want something for nothing.

The idea of income coming into our hands when we don’t do anything for it is very appealing.

From my experience, it is an illusion.

Sure, guys like Donald Trump and Bill Gates and Warren Buffet have enormous passive incomes. But nobody could ever say these people sit on the beach and money comes into their hands. They work incredibly hard in their businesses. They have done a lot of work to build a business and idea, keep systems in place, and keep their eye on what is happening at all times.

If they get passive income from a business, because they own shares and have no day to day involvement, it is the direct result of hard work to build it to a certain level and get great systems in place. And from experience, these kind of people keep going and starting new businesses, new challenges and new opportunities, to grow their wealth.

Warren Buffet has many companies generating him passive income. But it is well known he only invests in companies where he personally knows the management, and regularly checks the financials, and asks the hard questions when he needs to.

A classic example is I own some properties in the USA in a syndicate with two other people. Because I was so busy, I left management to my two syndicate partners. I discovered recently that a few of the properties had not been generating rent for months because of problems, and one of the partners had been a “bit nice”. (No criticism of him, as he is the guru in our team at finding properties, but he tends to be nicer to properties managers than I am when we are not getting results.) I got involved, insisted on changes, and the properties within a couple of months were generating income again.

A good lesson for me.

As a final tip, it doesn’t mean that in time, as you build good management systems in your business and investments, you will spend less and less time for the same income and same result. These days, I can generate the same income working for 10 hours per week as compared to 40 hours per week 10 years ago. Obviously my income needs have increased so I don’t work 10 hours per week! Plus I have some investments working for me. But I trust the point is clear.

So in summary, don’t be afraid to get your hands dirty, and realize no matter what stage your business or investments is in, you always need to keep an eye on it.

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