Fail to prepare for your business, means preparing to fail
JOHN Smith was let go from his job as a management consultant in 2009 but has since identified a niche market and set-up a successful company, Dublin-based Fitzwilliam Ltd, employing three people.
In these recessionary times when margins are constantly being squeezed, trimming the cost base and maintaining a close watch on cashflow is key to optimising performance.
Here are five lessons almost anybody can learn from John.
1. Free online advertising
John, as a tech savvy entrepreneur, has decided to make use of the free and highly penetrative advertising medium available online.
The main ones that John uses to promote his company are the social media sites, Facebook and Twitter.
John is able to update his customers immediately to new products and services available just by updating his Facebook page and by 'tweeting' to all of his followers.
He is also gaining increasing exposure and building up his contact base through using business social networking page LinkedIn. Finally, to keep customers updated as to future products and current offers he also has a blog updated regularly on the company website.
Once this is updated, then alerts are sent out from his Twitter account and also posted on his Facebook page.
2. Financial adviser
Having the right financial support is vital -- running a business is difficult at the best of times and trying to get a handle on complex financial issues and mandatory business returns is almost impossible without the right people behind you.
John knows his business and it is his main priority to continue to grow the business.
His job is not to be doing the books each evening and processing invoices. From the start, John appointed an accountant and tax adviser who takes care of all of the financial matters, from keeping the financial accounts to preparing the various returns that have to be completed e.g. company tax returns, payroll returns and personal tax returns.
The 'paperless' office is a term that has been touted around for quite a while now without ever actually ever happening. We have all worked in offices surrounded by mounds of paper!
However, for John and the employees of Fitzwilliam technology really can make a difference.
John and his employees have started to cut storage and paper costs by trying where possible to scan in documents and using email to send documents rather than by post or couriers.
A very handy tool, which John's personal assistant uses, is Adobe PDF995 which is a free tool that allows you to turn any document into a pdf which can then be emailed to their clients.
He then knows that it has definitely been sent to the client and also that it was free!
There is also an increasingly large movement of computer programmers who believe in challenging the dominance of companies like Microsoft and they are providing 'Open Source' software, (www.openoffice.org). John has his entire office using this software, which is an equally usable version of the suite of products in Microsoft Office (Word, Excel, PowerPoint) and saves a lot of money on licence fees in the meantime.
Finally, John has a number of international clients and contacting them by telephone is quite expensive.
However Skype, the phone program which uses the internet can be used for conference calls and has significantly reduced landline costs.
There is a variety of ways that one can set-up in business. The main structure used when setting up a new business is either as a sole-trade or as a limited company. In previous articles, I detailed the pros and cons of each of these structures.
Briefly, if a business will be making more net profit than you need as a salary, then a company set-up is the optimal route.
As John had identified a potentially profitable niche market and also had intended employing a number of people, he correctly chose to set-up in business as a limited liability company. For anyone starting out in business, this is a crucial decision to make correctly.
Cashflow is the lifeblood of any business, and keeping a handle on it is crucial.
As we enter into a new year, it is vital to plan ahead for cash which is needed to invest in your business on a medium to long term basis. Stock has to be purchased and paid for, credit given to customers, wages and expenses paid on a timely basis.
This requires budgetary planning to show cash inflows and outflows on a monthly basis. In summary, if you keep your costs under control and monitor cash flow carefully then profits will be maximised.
It is crucial to do this within the correct structure and with the best advice. Remember that if you fail to prepare then you prepare to fail.
Simon Ball is the founder of SB Tax Consultants and an associate of the Irish Taxation Institute. He worked for over six years with tax firm BDO Simpson Xavier and specialises in the areas of corporate and personal tax planning work and the preparation and filing of returns for both companies and individuals. He can be found at www.sbtaxconsultants.com