85% Of New Businesses Close Within Five Years Of Starting.

Don't Let This Happen To You.

Talking To An Accountant Even Before You Open Could Save Your New Business From

Failure

Every year thousands of people dream of starting their own small business. For some it is so they can become their own boss, for others it is to build wealth, while for some people it is for a sense of freedom. 

Yet for many would-be entrepreneurs that dream turns into a nightmare of low income, unpaid bills, deep stress and even losing their family home.  For many this horrible ending could have been avoided if they had sought the right advice before they started up their business. And one of the biggest causes of the problems for small businesses is the lack of understanding the financial aspects of owning a company

The key word in that sentence is "understanding."  That does not mean you have to be an accounting expert; it simply means you have found out your commitments, obligations and potential pitfalls of being a business owner. This is the difference between loving your business and being in the vast majority of uninformed and stressed business owners.  It is essential to talk to an accountant before you commit yourself.

What are your commitments as a business owner?

It is vital that you understand what you are taking on when you start up a new business. 

• You are not guaranteed a steady income especially to start with. 
• You do not get holiday pay or sick pay.
• You may have a mortgage or business loans to service.
• You will probably have to work long hours.
• You could miss out on family time.
• Perhaps you have taken on a lease for premises. This will probably have required a personal guarantee. Are you really sure what that means to you and your family?
• You have to file annual tax returns and Company Accounts.
• You must pay your GST on time every two months.

There are many pressures on a small business and many people are not suited to being in business for themselves. It pays to know your personality before you start to see how you can cope with these difficult circumstances.

Skills for your business

Many people start a small business because they have a particular skill they enjoy providing which could range from being a panel beater, a consultant or a hairdresser.  Besides that there are other skills people need just to survive let alone be successful - skills like marketing, selling (yes, all business owners have to sell) and even managing people. Financial management is one of the most important but accounting is usually not one of those core skills people have.

Get financial advice at the start before it's too late

Perhaps the most difficult yet the most important are the financial aspects. These range from:
• the type of business structure you have – a sole trader, a partnership, a Limited Liability Company or some other format. 
• Who or what owns the business is a topic 99% of people don't consider,
• how will you get out of it, also known as the exit strategy? That may seem a strange question even before you have started but it can save you thousands of dollars and much heart-ache if you have a clear exit strategy.

Also within the financial arena are the day-to-day accounts including bookkeeping services, management accounts, and monitoring your progress, so you don't get into financial trouble.

These are all issues which few people think about in depth. For many they are too complicated, boring and take you away from what you enjoy doing but they are absolutely vital to your commercial survival. Without sound financial management you don't know if you are making a profit and worst of all, you can quickly run out of cash. Without cash you cannot pay staff, suppliers or loans and your business will quickly grind to a halt. Cash-flow forecasting is probably the most important task for your business.

Summary

Someone once said, "Why would anyone go into business for themselves?"   With all of the pressures and vast amount of different functions you have to perform it can certainly feel stressful. Getting sound accountancy advice and knowing your financial position before starting your own business can reduce those pressures.

For more information about starting up your own business, call us on 444 9004 or email us at geoff@gtyler.co.nz for an initial free consultation.

 

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