Getting in shape to start your own business
Many of us dream of starting our own business, but to most it remains just that, a dream. We fantasise about what “being our own boss” would be like, after another run-in with the boss at work, or just the tedium of being in the same job, year-in, year-out, and starting to loathe every minute of it.
To turn your dream into reality, there is much preparation to be done when “going it alone”. Working with a financial planner can help ease the transition and make sure there aren’t any nasty surprises that you never thought of.
Before attempting to create your own business, you also need to have a practical look at your personal finances. If you have several credit cards that are maxed out or you have other unsecured debt, going into business is not going to magically produce the money to pay off your debts.
Michael Miller, FPA Certified Financial Planner and owner of MLC Advice Canberra, says: “One of the most important things a planner can help you with is cash flow, and understanding what you’re spending on living expenses.”
Miller says there are several reasons why this is important.
- You’ll be able to identify the amount you need to keep you fed and watered, and all of the important household bills paid
- You can work out whether you’ll pay for that out of savings while you get the business off the ground, or by drawing a wage from the business
- You’ll know if you’re able to make interest and principal payments for loans that might be required to purchase the business or fund start-up costs.
Miller says beyond those short-term cash flow assignments, a planner can make sure that any personal insurance you had as an employee is still suitable for self-employment. This is crucial for income protection policies.
Going your own way
When Canberra-based CERTIFIED FINANCIAL PLANNER® professional Paul Zobonos started his business, Manifest Financial Wealth two years ago, he had no existing clients. He knew it would be a while before the income from new clients grew to a level where he could start to draw a salary.
Says Zobonos: “That’s why doing a budget is an important first step in understanding how much income you will need to survive in the early stages of starting a business.
“There will also be costs incurred in setting up a business that need to be factored into the calculation, such as accounting and legal costs, IT costs, furniture, general insurance and rental of premises, to name a few. Depending on the nature of the business you may also need to purchase stock, plant and equipment,” he says.
Zobonos says a financial planner can help people who are starting their own business utilising the same process that is used when assisting them with their personal finances.
“A financial planner can help to identify the goals and objectives the individual wants to achieve in starting a new business, taking into account their overall financial resources,” he says.
As well as an ability to make strategic recommendations on the best structure to use to run the business, Zobonos says a financial planner can look at considerations such as:
- Asset protection
- Tax effectiveness
- Estate planning issues
- Set-up costs
- Complexity of the arrangement.
“Your financial planner will need to work closely with an accountant and a lawyer to cover off on any specialist tax and legal matters and to get second opinion on any complex matters,” he says.
TIPS for starting your own business
See what government and community support and training is available. For example, the Australian Government has a checklist for starting your own business and a business plan template. Website: www.business.gov.au
In South Australia the Adelaide Business Hub offers mentoring, help with finance, business “incubation” and priority access to Government funded programs.
If your business is a tech start up there are some great free and low-cost services available. Fishburners, a not-for-profit organisation, offers low-cost co-working spaces in Sydney and Brisbane, as well as many other benefits.
Look for networking events conducted by your local business chamber. You may meet others that you can obtain business from either directly or via referrals, especially if you are in a service business.
See what groups on Meetup you could join that might be to your advantage. Starting solo can be tough, so it’s good to meet like-minded others “going it alone”.
Online source: Produced by The Financial Financial Planning Association of Australia and published on 10 July 2017. Original article.