There are many reasons why you may be looking to attract investors in 2025. Perhaps raising funds for future growth or new product releases, diversifying the skills of the business leadership, or as part of your exit strategy. Sadly, tight economic conditions may be forcing you to sell out.

Either way, the competition for investment is fierce. There is no shortage of businesses for an SME investor to examine. 

The following tips serve as a checklist for making your business stand out from the pack and attracting the right kind of investor.

1. Clarify investment needs

Before seeking investors, determine what you want from them. 

There are numerous means of investing in a business, each with their own pros and cons – for the investor themselves, for the business within which they are parking their dollars, and for you as its owner.

Ask yourself: Are you seeking silent investors to raise funds? Partners to take an equity stake? Co-directors to assist with running the business? Buyers to assume full ownership, allowing you to either exit entirely or stay on as a salaried employee?

Some strategies lend themselves to shorter-term cash injections, others typically deliver better value longer term. The right option will depend on the needs of your business and your personal goals and aspirations – both now and in the future.

2. Get a valuation

Just like you get agent appraisals before selling a property and a valuation when remortgaging a loan, having a business’ valuation helps determine its market worth. This is powerful information to support your negotiations with prospective investors and determine whether you are getting a good deal or being walked over.

A valuation should consider all business assets, including: physical assets (property, equipment, inventory, vehicles, office furniture etc.); intangible assets (patents, intellectual property, brand, partnerships, goodwill etc.); customer/client databases; revenue sources; and profitability.

It should also factor in liabilities, such as debts and loans, contractual obligations, accounts payable, unpaid tax, outstanding payroll and super contributions (including your own), any director’s loans etc.

The business’ workforce is another factor. Labour is a significant expense (as every employer can attest), but the employees’ collective skills, qualifications, client relationships, performance and productivity can be a considerable asset. This is especially the case in niche markets and when, as now, unemployment remains low, making it more difficult to replace staff.

3. Think like an investor

You know your business better than anyone – its strengths, weaknesses and future potential. Unless you communicate that clearly to an investor, however, they won’t.

Consider what you want to see when investing your own money, including:

Overview: what does the business do? Where does it trade? What is the market context? Who are the competitors? 

Good housekeeping: up-to-date records, accounts, payroll etc. If payments are late or records missing, you would wonder whether the root cause of the problem is poor management or poor business fundamentals.

Profit-and-loss statements: a clear and complete overview of the numbers – past, present and projected.

Revenues: clearly articulated revenue sources and opportunities for growth.

Inventory: an itemised list of everything the business owns and can monetise (including products, equipment, supplies, assets etc.)

Customer databases: current records of who uses the business, what value is derived from them, and whether this database is growing.

Protections: insurances, back-ups, contingency plans and procedures etc.

Ownership structure and governance: who owns what.

The more you can clearly show investors, and the cleaner it looks, the more value they will recognise in the business as an investment opportunity.

4. Consider your timing

Timing is crucial when seeking and onboarding investors.

Try to avoid the distraction of dealing with investors during peak trading seasons, when your focus is needed within the business, and when sub-optimal conditions restrict the business’ value (cash flow lulls and market downturns). 

Tax time, summer holidays and seasonal influences can cause investors – and yourself – to be absent or distracted, instead of prioritising the investment negotiations.

Remember, too, that we have a federal election due by May this year, which can put investors into a holding pattern until an outcome (and the related election promises) are known.

5. Consider a range of sources for investors

There is no one source for finding a business investor. It will depend on what you already have at your fingertips and what makes you most comfortable. Options include:

• Business brokers
• Accountants/business advisers
• Your business mentor(s)
• Industry networking events
• Peak industry bodies
• Trade and small-business media
• Angel investor groups
• Crowdsourcing platforms (such as Kickstarter)
• Your own contacts

6. Explore in-house alternatives

Your contacts can be particularly powerful, given you already have an established relationship with them. They may even be customers, suppliers or staff, who already appreciate the business’ offering and its future growth potential.

You may not need to look for outside investment – allowing you to retain full ownership of, and dividends from, your business.

For example, self-managed superannuation funds (SMSFs) can legally carry on a business, provided its trust deed allows this and the business is operated solely to provide retirement benefits to its members. SMSFs can also purchase the commercial property your business uses, so the business pays rent to your super instead of to someone else. SMSFs aren’t for everyone, though, with considerable compliance requirements and costs to weigh up. 

Alternatively, you may be able to seek buy-in from relatives, transforming you from a sole trader to a family business. This has the advantage of diversifying the risks and labour requirements while retaining revenues and ownership within the family. Plus, it can create an ongoing legacy and source of income for future generations.

7. Consider their reputation

Investors are people and it’s important to consider how those people fit into the business.

Strained relations with employees can lead to a staff exodus – valuable knowledge and experience walks out the door, potentially taking customers with them.

Poor engagement with suppliers could cause them to inflate prices, deprioritise your orders or cut off supply altogether. 

Tensions between you and/or fellow directors can delay strategic decisions and erode trust. 

None of this is conducive to profitable operations, and can stifle the value of the business for everyone.

Additionally, having established investors can affect your ability to on-board new ones. Some prefer exclusive relationships; some are reassured by other investors having already contributed money.

8. Protect your own interests

Above all, remember: The business is as much your investment as anyone else’s. Make sure you get the greatest value out of that investment. And don’t let it bleed your personal finances dry. 

Consider also whether investors are the right way to go in the first place. If the goal is temporary cash flow support or funds for asset acquisition, SME finance options or commercial loans may be more appropriate than trading away ownership of the business.

There is no substitute for good advice to help with your decision-making. If you are seeking investment, reach out to your financial adviser, accountant and other specialists to ensure you maximise investment opportunities, minimise tax and avoid letting someone else unfairly reap the fruits of your labour!

Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organisations the owner may be associated with in a professional or personal capacity unless explicitly stated. Helen Baker is an authorised representative of BPW Partners Pty Ltd AFSL 548754.

This article first appeared in issue 47 of the Inside Small Business quarterly magazine

The post How to attract investors to your start-up or small business in 2025 appeared first on Inside Small Business.

Fancy unlocking opportunities to boost revenues, cut costs, access new markets, and work smarter instead of harder? It’s all possible with a bit of innovation. And anyone can do it.

You may not consider yourself to be a risk-taker or innovative thinker. Yet as a business owner, you have already taken a big risk. And you know what does and doesn’t work within your business – and for your customers – better than anyone.

Tap into that knowledge and you’ll discover there are many ways to innovate, often with substantial rewards attached. Here are some of the most common types of innovations and some thoughts on how to achieve them.

1. New products and services

Most people think of innovation as new products or services: an entirely new concept, a unique solution to a problem, or an improved take on existing goods or processes. 

Bringing such innovations to market requires a good idea, technical know-how and impartial testing, but it is often funding that is the real obstacle. Yet there are numerous options available. A combination may be necessary to meet the required cash injection:

• Grants: governments, some corporates, accelerator programs and industry bodies offer innovation grants.
• Incentives: offset costs in other ways, such as tax breaks, discounts, access to specialised technical advice.
• Awards: Prizes for industry awards can be lucrative, while simultaneously showcasing your innovation to prospective customers.
• Partnerships: Shared equity in your innovation with sale proceeds split once you go to market.
• Capital raising: includes traditional loans, seed funding, outside investment, and director loans using your home equity or savings. Proceed with caution though. This is an investment; don’t take on more than you can afford to lose should your innovation not succeed.

2. New revenue streams

New offerings aren’t the only means of creating new sources of revenue. Sometimes, delivering existing offerings in new ways provides opportunities to reach new customers or sell more to existing ones. Consider:

New pricing models: for instance, introducing a subscription service – you derive more regular (and typically higher) revenue; customers benefit from improved cash flow and ongoing support.

Updated pricing structures: if you deliver more value than competitors, with greater experience, superior quality or another USP, charge more to reflect it.

Package deals: Bundle complementary products or services into a new package deal, which may better cater to new markets, such as larger businesses or more price-sensitive customers.

A great example is vegetable growers turning waste produce into saleable product, by using odd-shaped or sized produce sliced and in ready-to-use packages.

“Employees are often the largest single cost of doing business. Are you getting your full money’s worth from them?”

Alternatively, leverage your own specialised skills and knowledge, such as through professional speaker fees, publishing a book or hosting tailored training workshops.

3. Operational efficiencies

Innovation isn’t necessarily restricted to customer-facing or income-generating activities, back-of-house operations are ripe for change.

For example, do you really need centralised operations with all staff working from expensive premises? Some or all of your workforce could work from home, allowing your business to downsize rents and sell/sublet unused space, while also potentially improving productivity.

While the concept itself isn’t new, it may involve the rollout of new processes and systems to make it happen, or simply be an innovative step for an established business.

You could also develop a new manufacturing process that cuts waste or increases output, trial new marketing methods uncommon within your industry, or unlock the power of artificial intelligence for mundane tasks.

4. Tax and financial management

Implementing innovations into this aspect of a business can stem cash leakage and unclaimed deductions, bring in revenues faster, improve cash flow visibility, and streamline compliance processes. 

Say your accounts person (which may be one of your many hats as business owner) spends considerable time chasing overdue invoices and expenses. Update your invoicing process to make it easier for clients to pay promptly – such as by adding a ‘pay now’ button or QR code to invoices. And slash forgotten claims, lost records and the dreaded end-of-month influx by embracing apps that allow on-the-spot photographing and lodgement of expense receipts. The time saved can then be reinvested into more income-generating activities.

Think creatively about how your cash reserves are used – are they languishing in a bank account or wisely invested to accrue interest and hence extra revenue? Are your loans, term deposits, etc, optimised for current rates and market movements? Do you have stop losses in place for foreign exchange movements?

Also look for ways to improve security and detect fraud. Scammers and cybercriminals are innovating with their methods of attack, meaning your defences must innovate, too. 

5. Staff empowerment

Employees are often the largest single cost of doing business. Are you getting your full money’s worth from them?

Business leaders who don’t regularly connect with their teams, or develop a culture where ideas aren’t encouraged and considered, risk losing considerable opportunities to innovate.

Customer-facing staff are the best tool you have for tapping into customer problems and needs. Technical staff have the skills and know-how to improve existing offerings and develop new ones.

Furthermore, employees given the freedom to be creative and bring their ideas to fruition learn new skills, can be more engaged, and are more likely to stay with you. Don’t underestimate this powerful tool for improving staff retention and aiding recruitment in a competitive labour market.

6. Revised business model

If the COVID-19 pandemic has taught us anything, it is that change is inevitable. With that in mind, perhaps your business would be more profitable and/or more sustainable longer term with a more innovative business model.

For instance, look at the media industry. Its previous business model focused solely on generating content for its chosen channels – print, broadcast, digital – paid for through advertising revenue. Now, many media companies are also events companies – offsetting ad revenue losses in the digital age through ticket sales, while adding greater value for their audiences and generating new exclusive content for their existing channels.

You may even already have an innovative product, system or service without realising it could be monetised. 

Many businesses develop their own platforms, software, apps, tools, employee training programs and so on for internal use. Could they be repackaged and sold to other businesses? Depending on scalability, uniqueness, and potential market size, this could ultimately be more lucrative than your existing products or services.

The meaning of innovation

Innovation isn’t necessarily about revolution. You don’t need to reinvent the wheel or create the next Google. Even minor changes that deliver a positive alternative to the same old approach are innovative.

In fact, starting small allows you to build confidence in trying new things before moving onto bigger, costlier and risker innovations.

So, what are you waiting for? Get innovating and see how you can drive your business’ bottom line to a more desirable destination.

This article first appeared in issue 43 of the Inside Small Business quarterly magazine

The post How innovation can drive your bottom line appeared first on Inside Small Business.

How can businesses better embrace innovation to remain competitive and reap the tangible benefits for their bottom line?

1. Shift culture
   Innovation requires curiosity, adaptability and an eagerness for change – traits that serve a business well more broadly, such as agility in response to sudden market shocks and embracing new customer requests/sales opportunities. Additionally, fostering innovation promotes enhanced productivity and idea retention. Hence building an innovative workplace culture can be a lucrative long-term investment.
   Good recruitment practices are part of the equation, but so too are the implementation of processes that foster creative thinking, empower staff to generate and voice ideas, facilitate open communication between employees and management, deliver tools for measuring success or failure of trials, and pre-determine project ownership.
2. Innovate products and services
   Developing new products or services is probably what most people consider innovation to be.
   The aim is to deliver something new and cutting-edge, opening up entirely new revenue streams, or significantly improving existing goods or services in order to command higher prices and potentially steal market share.
   In times of crisis, innovation can even determine ongoing viability – such as the businesses that pivoted operations during the pandemic. Existing customers are an ideal and inexpensive test ground for trialling new innovations, especially where those innovations are based on their feedback and input.
3. Disrupt from within
   Sometimes a new way of approaching existing operations can deliver cost savings or revenue inflows. Trials of a four-day work week in the UK are a great example of innovating how we work, not just what we deliver – hinting at substantial productivity gains.
   Everything from new ways to invoice clients that promote prompt payments (like adding a ‘pay now’ function to invoices) to changed marketing tactics (such as baby retailers shifting their advertising time to coincide with 2 am feeds) can deliver material gains – provided a business is willing to trial something new and effectively scrutinise its findings.
4. Innovate pricing
   Pricing should never be set and forget: innovating pricing structures may drive sales growth by diversifying the sales base and solidifying customer loyalty.
   One need only look at the likes of Twitter and Meta, owner of Facebook and Instagram, trialling subscription services as evidence of this approach at work. Or the pay-what-you-want movement in the hospitality sector, which often generated higher revenues than the fixed-price standard in addition to the resulting publicity and marketing exposure.
   Pricing is also one of the few operational aspects under the complete control of a business, making it a safer target for innovation.
5. Leverage financial incentives
   All levels of government typically offer support for innovation, through an array of grants, incentives and tax breaks. Other incentives are offered, particularly for small businesses and start-ups, by industry associations, major banks, start-up accelerators and more.
   Some offer early cash injections to meet associated financial costs; others apply retrospectively in the form of reimbursements or tax offsets. Either way, these incentives can substantially offset the financial costs associated with research and development, overcoming the most common barrier to innovation.

Commit to the cause

Innovation is effectively calculated risk-taking – testing something different and quantifiably measuring the outcomes. It is done with the hope of big rewards, but even failures deliver important lessons – which can be used for future endeavours or implemented elsewhere across the business.

Uncertain economic climates mean that innovation budgets are typically the first to go. But what happens if you don’t follow the herd and maintain – or even expand – your innovation endeavours? You’ll be further ahead of competitors once conditions improve and have a stronger balance sheet with which to hit the ground running.

The post Five ways to use innovation to drive your bottom line appeared first on Inside Small Business.

The viability of any business is its financial health. If you’ve been guilty of devoting all your time to working in the business rather than on the business, it’s time to take a step back and review the numbers.

It’s so easy to get caught up in the day-to-day work and the many, many demands on your time as a business owner. Customers, employees and suppliers are all important relationships to build and maintain.

Yet they can obscure the fundamental health of the business – sometimes until it’s too late.

This checklist is a good way to audit the financial health of your business and help you shore it up for a long and prosperous future.

1. Rightsizing your business structure

Some businesses aren’t suitably structured for their current situation. Which structure your business operates within can affect its tax status plus your rights and responsibilities as a director and/or shareholder.

Sole traders and companies are the most well-known structures, yet others exist, such as partnerships, trusts, co-operatives, joint ventures, and Indigenous corporations.

Growth over time may make businesses outgrow a particular structure; for example, when a sole-trader takes on staff or a private company goes public.

Business structure also includes property. Should you buy or rent your business premises? The decision has considerable cost, tax and investment implications.

For all these reasons, it pays to review your business structure.

2. Finance plans

A finance plan provides clarity over financial goals and strategies for reaching them.

And, while it may feel like you and your business are one, you are two separate entities. Hence, you need separate finance plans.

“Don’t overlook the power of the share economy to earn passive income.”

This will help you safeguard and track your personal finances independently of the business, which is important for various reasons – such as calculating tax liabilities, selling, or exiting the business, refinancing your home, taking on business partners and alternative investments.

Each plan should be built on the same five foundations:

• emergency fund
• spending and investments plan
• insurances/risk mitigation
• superannuation/nest egg
• estate planning/exit strategy.

You may also find it useful to revisit your business plan, ensuring operations remain aligned with your goals, market and purpose.

3. Funding/working capital

Interest rates have been a hot topic in recent months. Have you reviewed your business loans and other debts? What about your home mortgage – especially if it is security for a business loan or equity that could be reinvested?

You may reward your customers’ loyalty but, sadly, most banks and lenders don’t.

A good broker can help you refinance to a better deal. Also weigh up whether to purchase or lease new equipment, factoring in the purchase price, any borrowing required, and ongoing maintenance and repair costs.

4. Tax management

Chances are you have some form of savings to be gained or deduction to be made that you aren’t already using.

Do a depreciation audit; itemise every item you are eligible to depreciate, then check you are claiming the full tax deduction for each.

Review your personal expenses versus those of the business, ensuring you aren’t double-dipping (which may attract penalties) or paying too much tax by claiming through the wrong entity.

Keep your tax, wages and superannuation payments up to date, to avoid late penalties and to protect your cashflow – smaller, regular payments are easier to accommodate than larger instalments less often.

Double-check that wages and super are being distributed correctly.

Consider charitable donations, too – they may be tax deductible and support your marketing activities.

5. Staffing, incentives and rewards

With acute labour shortages nationwide, retaining current employees is a must.

Consider how you are paying, incentivising, and rewarding your staff. Do they feel valued? Are competitors offering more? 

Pay is just one factor. Non-monetary benefits or rewards you could offer include additional training, appointments with financial advisers, accountants, massage therapists or meditation teachers, discounted benefits at other local businesses (gyms, cafes etc.), competitions, team-bonding events, extra annual leave, educational resources such as books – the possibilities are limited only by your imagination.

6. Risk mitigation

Cast a critical eye over your operations and see how well they would stand up in the face of an unexpected disaster or sudden market shift.

Among the gaps may be:

• Insurance: out-of-date policies, inadequate cover, policies with poor value for money or providers notoriously slow at paying out claims.
• Contingency plans: remote working processes, digital systems and website back-ups, emergency scenario strategies and a pre-determined roster for who implements them.
• Security: site access, cyber-security, password protections.
• Cash flow: identifying peak cashflow gains and drains, foreign exchange stop-losses, current inventory.

Be sure your review covers all operations, assets and cashflow.

7. Bring in money 

Money in hand is worth more than money owed. Scrutinise your current means of banking the cash.

Invoices generally become harder to recoup the longer they have been outstanding – how earnestly do you chase them? How can you simplify payments for your clients – for example, by adding a ‘pay now’ button on invoices, automated reminders and payment plans?

Examine your product/service offering – are there gaps where extra revenue could be earned? What innovations can you bring to market? Are you fully capitalising on your USPs?

Also, don’t overlook the power of the share economy to earn passive income. Could you rent unused warehouse, office, retail or parking spaces, vehicles or equipment?

8. Charge what you’re worth

Pricing should reflect not just what you offer, but the value you provide.

You may offer the same product or service as Jim or Jane down the road, but if your offering has greater value for the customer, you potentially could charge more to reflect this.

Added value could be additional perks, faster delivery, more in-depth service, or superior qualifications and experience.

Also examine what is selling well or poorly. You may be losing revenue potential by retaining products or services the market no longer wants.

9. Be ruthless on costs

It takes money to make money. But how much of your spending is really needed or delivering full value?

Common sources of waste include:

• Unused or underused subscriptions
• Unbudgeted social media advertising
• Poor value utilities, insurances, loans or services
• Technology and software.

10. Look after yourself

Review costs regularly to ensure you pay only for what you use and get full value from.

Investing in your business means investing in yourself.

Poor health – physical, mental or financial – has many flow-on effects, including absences, poor decision-making, distractions, low productivity, and higher medical bills.

Maintain a good diet, regular exercise and sufficient sleep. Allow yourself a break or holiday to recharge. 

Pay yourself fairly and regularly – wages and superannuation – to extract value, safeguard your personal finances, and diversify your retirement assets.

And don’t go it alone. External input will ensure everything remains on the right track. So, check in regularly with your tax adviser, mentor or business coach, financial adviser, and your doctor, too.

This article first appeared in issue 39 of the Inside Small Business quarterly magazine

The post Stay fine, fit and on the money appeared first on Inside Small Business.

With so much change, it’s crucial you do so. There’s no better time (for most businesses at least) than the quiet time that comes after the Christmas rush.

Review costs

With soaring inflation, tracking expenses is likely more difficult this year. Investigate where the increases have hit hardest and what can be done to limit their impacts, including:

• Interest rates – If you haven’t already, review your loans to see if refinancing and/or switching lenders could drive down ballooning repayments.
• Labour – explore ways of attracting/retaining skilled workers without blowing out your wages bill e.g. staff discounts, additional leave, training, or informational resources.
• Business premises – right-size your premises to the company’s current needs. If most staff are still working remotely since COVID, consider downsizing and pocket the savings. Alternatively, sub-let unused office/warehouse/parking spaces to offset costs.
• Marketing – social media, advertising etc. are money pits if their costs and returns aren’t properly tracked. Review these objectively to see if you’re actually reaching your intended audience and generating cut-through.

Get forecasting

Armed with your numbers from 2022, you can have a good go at forecasting for the year ahead. Pay particular attention to:

• Taxes and government benefits – the new federal government’s first Budget was delivered on 25 October, so things may have changed or soon change for your business.
• Pricing – charge what you’re worth, reflecting both the value you deliver and your actual cost base.
• Exchange rates – avoid wild FX fluctuations by implementing stop loss orders and other control mechanisms in advance.

Revisit contingency plans

Renewed east coast flooding, the Ukraine war, and COVID are examples of why contingency plans are needed. Be sure to revisit:

• Insurances – if you’ve had to claim for fire or flood damage in recent years, your premiums may now be higher and/or your coverage restricted. Determine whether you’re paying more but getting less, and what alternatives are available. Also, if your business has grown and/or acquired new stock, update your coverage or risk being underinsured.
• Cashflow safeguards – planning in advance for lulls in cashflow will enable you to act faster and in a less knee-jerk way.
• Emergency fund – have an emergency cash stash set aside. If you’ve had to dip into it, plot out how to replenish the money.
• Crisis procedures – plan for natural disasters, power failures, cyber-attacks, unexpected staff absences (including your own) etc.

Streamline expenses

A major cashflow drain comes year’s end is employee expenses. Reduce this burden by streamlining the process and encouraging staff to lodge claims more regularly:

• Digitise systems – expenses apps make it as easy as photographing a receipt at the point of purchase and submitting the claim instantly.
• Weekly reminders – a simple prompt can nudge people into action.
• Company credit cards for key staff – (provided you can repay them on time.) Track spending in real time and earn rewards points for offsetting travel/other expenses.

Embrace the spirit of the season

Christmas is a time of thanksgiving. Consider how you plan to acknowledge those who have helped your business survive (and hopefully thrive) over the past year.

• Customers/clients – They are the reason you have a business, so a simple thank you goes a long way. It could be a freebie gift or a substantial discount voucher encouraging them to shop with you again.
• Employees – Christmas parties double as team bonding events. Discounted gifts could be sourced in bulk from a supplier/partner. Alternatively, consider a charitable donation in their name – you’ll even enjoy a tax deduction on donations $2-plus.
• Yourself – Don’t forget to reward your own hard work! At bare minimum, catch up on paying yourself wages and super – you could even be eligible for a gift from the government in the form of a co-contribution on additional payments you make!

The post Why you need to conduct an end-of-year business financial health review appeared first on Inside Small Business.

Thankfully, with a bit of forethought and preparation, Aussie SMEs can avoid some of the worst financial mistakes that may befall their poorly prepared competitors:

1. Lack of diversification

The past two years have been a painful lesson in the problem of putting all your eggs in one basket.

Border closures, shipping bottlenecks, and reduced air traffic constrained supplies of many imported goods. More recently, staff absences have caused supply chains to buckle. Add to this geopolitical tensions impacting overseas manufacturers and routes to market, such as the trade tensions with China and the Russia/Ukraine stand-off.

Start 2022 on a positive footing by diversifying your operations. That means not only supply chains, but also your revenue streams and customer markets too. This is to ensure your business can continue bringing in revenue even if a supplier goes bust, raw materials are delayed in transit or sales in a particular product dry up.

2. Poor financial planning

Cashflow is king (or killer!) in business: It’s crucial to know your numbers, have good recordkeeping practices and devise contingencies for those leaner times. Leverage the knowledge of your financial adviser and accountant for further clarity.

Also, don’t overlook potential impacts from the following in 2022:

• Interest rates: Speculation is mounting that the Reserve Bank may hike interest rates sooner than expected to curb rising inflation. However, many lenders have already moved in recent months. Consider how that impacts your access to and cost of finance, credit cards etc. On the flip side, rising rates may give you cause to increase interest charges on late payments.
• COVID stimulus: Most governments still have COVID support measures in place. Have you claimed everything for which you are eligible? Are you clearly advertising that you accept consumer incentives like NSW’s Dine and Discover vouchers?
• Pricing: Supply shortages are driving up costs for many goods. Analyse whether your own prices need to rise given these higher operating expenses.

3. Ignoring the politics

Australians are due to go to the polls by 21 May 2022 for a federal election, meaning there will be plenty of sweeteners from all sides of politics to try and win the business vote.

Ignore all this at your peril.

There could be major tax and financial incentives outlined – such as further changes to small business tax offsets. Conversely, ballooning public debt could prompt sneaky tax increases to boost the budget’s bottom line.

4. Neglecting your staff

While international borders look to be reopening this year, that doesn’t guarantee a sudden influx of foreign workers to fill domestic labour shortages.

Hence staff retention will be more important this year than ever before – especially amid concerns of a so-called “Great Resignation” in 2022. What is the cost of losing them? Perhaps find out from your staff what motivates them: Flexible hours? More money? Promotions or upskilling?

Also consider how you can supplement income with other perks, such as facilitating financial advice, free consultations with other professionals, or short courses offering work and personal uses

5. Not knowing your market

Many businesses have pivoted their operations because of the pandemic but some will sadly not recover.

Will you need to seek out replacement customers? Are there new customers now that the wheels are turning again? Survey your industry and local market to see what has changed and where things are headed. That will place you on the front foot instead of desperately playing catch-up.

The post Five key financial mistakes SMEs should avoid in 2022 appeared first on Inside Small Business.

Mistake #1 – Not paying yourself

Not paying yourself a salary is so common particularly in the early years when cashflow is unsteady. It may even seem rational when you’re starting but after a while, you need to ask two questions: is there a benefit in what you are doing and are you getting financial rewards? While you may be fine with the situation from a values perspective – you trade off flexibility or working from home for earning less – the reality is that bills need paying.

Mistake #2 – Forgetting about superannuation

Self-employed women rank near the top of the biggest losers among Australia’s working population in teams of super savings. Research, commissioned by the Association of Superannuation Funds of Australia, recently found only 22 per cent of self-employed women contributed regularly to their super: more than half were not contributing at all! Remember, as an employee, you would get 9.5 per cent superannuation (or a bit more) of your salary.

“Because cashflow can be a consuming focus for business owners, they commonly shortchange themselves by not paying themselves superannuation.”

Because cashflow can be a consuming focus for business owners, they commonly shortchange themselves by not paying themselves superannuation. But failing to do this means that if anything happens to the business, there is no superannuation to provide for you down the track. And imagine how much that ‘pot’ with compound growth adding up over time from even small contributions would be.

Mistake #3 – Not managing business cashflow

Businesses require their own revenue (income) to meet their own expenses. Excess cashflow then feeds to your personal ‘spending and saving plan’ through salary or profits or both, feeding your lifestyle and that of staff.

Business cashflow, just like your personal cashflow, requires management. Fixed expenses, variable expenses and socking away some cash in an emergency fund for when income is down are common to both business and personal financial management.

Mistake #4 – Overlooking adequate insurance

Just as insurances are a foundation for your personal financial house, they are relevant for business security too. Business insurance can cover fixed expenses like rent that needs paying even if you were unable to keep the business going due to sickness or death. Business insurances protect against the key people you rely on in your business in case something happens to them. If they fall seriously ill (or die), their absence can affect your bottom line. Revenue protection is about protecting income. It not only provides the everyday cashflow provision you need to keep your business afloat, it is also a key factor in the value of your business. Ownership protection safeguards your share of the business’s value, whether that’s 100 cent or a co-owner. It’s important if you (or another co-owner) decide to leave the business.

Asset/debt protection protects if you have borrowings against your home (or similar) that you would be liable for if something happened to the business. You don’t want creditors coming after your house!

Mistake #5 – Under-estimating your business’s value

Revenue is a contributing factor which determines the value of your business. Without it, your business generally has no value. Profit is also considered. Whether you want to sell, plan this as your retirement pot or are forced to sell, protecting the revenue is vital.

We often don’t think of ourselves or key staff as sources of revenue. Take, for example:

• an employee who is very technically minded and performs a specific role that no one else does. Your business would be in a big hole if that person left. Even if you could bring someone else on, a time delay may be costly.
• an employee who is a really great ‘people person’ and has firm relationships with your key clients. Without that person, the relationships are not there and clients don’t order. No sales equals no revenue. No revenue equals no value.
• what if something happens to you as an owner/director? Do you have all the intellectual property knowledge? Do you manage the staff and keep things ticking along?

Mistake #6 – Failing to have an exit plan

When you have a business, your focus tends to be on its everyday running: sales, cashflow, staff issues, opportunities, building relationships and so on. Rarely, do owners think long-term, to an ‘exit strategy’.

• When do you plan to exit your business and how?
• Will you sell the business to a third party, a staff member, other partner or competitor?
• How does the business retain its value without you?
• What are the implications for staff?
• What are the commitments to premises or other fixed contracts?
• What are the legal costs of closing the business down? Who would pay those if the business becomes valueless?
• How long will it take to find the right sale, transition a handover?

If it is a niche business, it may be harder to sell to the right person. Please don’t think “I’ll deal with it when it happens”, shoving it mentally into the ‘too hard’ basket. This can be too late and can have serious financial consequences, particularly in relation to the health issues. Instead, start with the end in mind and document your thoughts. They can always be fine-tuned.

Mistake #7 – Putting all your eggs in one basket

We live in a world of change. What’s viable – indeed ‘hot’ – right now, may not exist in 20 years. Take, for example, home entertainment.I remember when video stores opened. They were massively popular. But just like The Buggles sang “Video killed the radio star”, YouTube, Netflix and other video streaming services killed off the local DVD stores. Another example is plant nurseries, having to diversify their stock and range to survive climate extremes. The further you are from retirement, the riskier your business’s value. The risk is all the greater if you don’t put money into superannuation (which we know is a common mistake already).

Mistake #8 – Not sorting out legals

People with business partners really need to make sure they have the legal documentation of a ‘buy/sell agreement’ in place, along with insurances. If something happens to you, is your intent for the business partner to get both your business share and your life insurance? What about your family? Would you intend your loved ones to get the life insurance payout and your partner receives your business share, to continue? Sadly, details as obvious as this can be overlooked in the busyness of a business. You should also protect your intellectual property such as logos/trademarks, content, and ensure your contracts are looked over. You will need commercial lawyers for these aspects.

This article first appeared in issue 32 of the Inside Small Business quarterly magazine

The post Managing the money appeared first on Inside Small Business.

To build secure financial foundations for your future, it’s important to weigh them all up before deciding to deny yourself these funds.

Risks

• Your business fails: You can’t be certain that your business will survive as long as you. Without super to fall back on, you’ll be left with nothing to show for your efforts should the worst happen.
• Your business sells for less than you hoped: Your business may be worth a lot now, but that may not be the case when you want to retire, or need to due to ill health or some other change in circumstances. Again, without super, you are left exposed.
• Your business fails to sell: Planning to sell your business and being able to do so are very different things. There are a lot of reasons why a business may fail to sell: some you can fix, others not. If you have super, you could semi-retire or appoint a general manager to run things for you until you do find a buyer. Without super, you are stuck working for longer.
• Lost earnings: Under new rules, inactive low-balance super accounts (those with no incoming contributions) must be wound up. While monies from closed funds can be returned, you’ll lose the earnings they could have built had the account stayed open, plus any insurance policies you had tied to them.

Lost opportunities

• Business premises: For some business owners, a self-managed super fund (SMSF) can deliver both business and personal benefits. Your SMSF can purchase the property from which the business operates and set the rent it pays. You own an additional asset from the business and the rent ultimately goes back to you instead of some third party. Meanwhile, the business can enjoy favourable rental terms, such as price reductions when cashflow is tight.
• Lower tax bills: Self-employed Australians are generally able to claim a deduction for their pre-tax super contributions. Plus, super contributions are only taxed at 15 per cent, whereas most incomes are taxed at a much higher rate. That means your taxable income goes down, even though the money is going to yourself via your super.
• Co-contributions: If you are deemed to be a low-income earner (many self-employed people earn less than their employees), you may be eligible for government co-contributions. Not only are you saving for retirement, you’re essentially getting free money added to the kitty.
• Spousal contributions: Depending on your spouse’s income, you could reduce your tax bill by contributing to their super too. Plus, they may then qualify for government co-contributions on top of those payments you make.
• Compounding effect: Not investing in super in your younger days means you don’t benefit from the compounding effect over your working life. And by depositing funds along the way, you can take advantage of price cycles in various assets (buy low, sell high) to generate better overall returns. 
• Insurance protections: Life, disability, and income protection insurances provide a safety net over your ability to earn a living. You may not bother with them if they had to come out of the household budget. But with super paying for them, you can protect yourself and your family without feeling the pinch.

Armed with this newfound knowledge, go back and revisit your decision to not pay yourself super. You may just realise that you’ve unwittingly been putting the brakes on your wealth-building efforts!

The post The dangers of not paying yourself super as a business owner appeared first on Inside Small Business.

In so many ways, running a business is like a marriage: you see each other at your best and worst; your blood, sweat and tears go into keeping it healthy; and together you build a better future for your family. Here are a few ways to spoil your business this Valentine’s Day with the attention it needs and deserves.

Share the love

The spirit of Valentine’s Day is showing love and appreciation to your nearest and dearest. So, why not do something special with your team!

It might be as simple as a free coffee or a thank you card. You could give them reading materials on building better financial foundations (which they can use both personally and professionally!) Or you could go all out with gifts of wine or flowers, an unexpected bonus or team-building lunch.

Especially after the trying year that was 2020, marking the occasion is a simple way to boost morale. And employees who feel appreciated generally work harder and stay longer, meaning your business will reap the rewards in the months and years ahead!

Wine and dine customers

When was the last time you checked in with your customers? Not just a quick “g’day” or a “can you please pay that outstanding invoice”. I mean a real check in to see how they are, how their business is travelling, what their current pain points and latest ambitions are.

Too often, we get caught up in the busyness of our own day and forget to connect with others on a meaningful level.

Customers who feel neglected or used as a cash cow may look to your competitors for a more inviting alternative – even if your product or pricing is great. Not only that, you could be overlooking ways to upsell to them.

Spending time with key customers and really listening to them is a rewarding investment in driving repeat sales, customer loyalty and word-of-mouth referrals.

A date with the books

The equivalent of a big romantic gesture for your business has to be delivering it a big wad of cash.

While money doesn’t grow on trees, there are ways to unlock extra funds. Start with a review of your:

• Marketing: One of the easiest ways to haemorrhage funds. Can your marketing deliver better returns or achieve the same for less? Watch those ad hoc transactions too: a $5 boost to Facebook posts here and there quickly adds up.
• Working habits: COVID-19 changed the way many people work. Does your spending reflect current operational needs or old ways of working? Do you need that big office with the big rent now everyone works primarily from home? Would company cars be cheaper than paying for travel reimbursements?
• Taxes: Small businesses (and individuals) often pay more than they need to. Double check that you’re claiming every deduction and incentive your business is entitled to, including asset/equipment/fit-out depreciations, GST refunds, job creation rebates, COVID stimulus and R&D incentives.

Play it safe

Prevention is better than cure when it comes to things that make us sick. It can be worth reviewing risks and what protections you have in place: your business will thank you should it ever need to fall back on them!

Scrutinise your:

• Insurances: Do you have the necessary coverage – including business interruption and professional indemnity? Are payments up to date? Should policies be modernised to reflect changed operations and assets? Can you get the same coverage cheaper?
• Backups: Software, data, IP, passwords, imagery, content, websites… it’s worthless if it’s lost.
• Contingency plans: What happens if key staff leave or are suddenly unavailable? Can you keep trading if COVID forces everyone into isolation again? What if power is cut for an extended period?
• Security protocols: both physical and cyber security are crucial to avoid fraud and theft.

Love thyself

Your business is nothing without you. Hence, it’s crucial to look after your own health and wellbeing – both physical and mental.

That could involve spending time with family and friends, revelling in your favourite hobby, a well-earned getaway or even just catching up on sleep! And seek treatment for any niggling issues you’ve been putting off.

A Valentine’s Day treat for yourself will keep you energetic and clear-minded: a win for both yourself and your business.

Helen Baker, licenced financial adviser and author of “On Your Own Two Feet – Steady Steps to Women’s Financial Independence”

The post Five ways to spoil your business post Valentine’s Day appeared first on Inside Small Business.

These are uncertain times. We can see the world changing before our eyes. Yet there is a thing we know for sure won’t change – taxes. So now that it’s that special time of the year there are some things business owners need to start thinking about to get ready.

1. Federal government stimulus package

The stimulus package has several relevant features for businesses, so take a good look at whether these apply to you. The measures are designed to support businesses making investments. The government also wants to encourage businesses to bring planned investments forward.

The instant asset write-off threshold has increased from $30,000 to $150,000. This makes it a good time to buy any assets you’ve been meaning to buy such as vehicles, tools, equipment, computers or office furniture.

There is also an investment incentive for businesses which accelerates depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 per cent of the asset cost in the year of purchase.

There is a cashflow booster payment, of between $2000 and $25,000, for small- and medium-sized businesses. The payments are for 50 per cent of a Business Activity Statements or Instalment Activity Statement.

There is also a wage subsidy for employers of apprentices and trainees. The subsidy is for 50 per cent of an apprentice or trainee’s wage. The subsidy period is from January 1 2020 to September 30 2020.

This situation is changing each day. This might not be the last we hear from the government on the issue of economic stimulation. Keep up to date with the changes to make sure you don’t miss out on an opportunity.

2. Get your records ready

If you are using a system like Xero, pulling your records together shouldn’t be an ordeal. The danger for a lot of small businesses – and I often see this issue with tradespeople – is not planning or keeping records. Often, they’ll get paid and don’t set aside cash for GST. When the GST bill comes around it’s a massive rollercoaster of no cash and scrambling until they catch up.

I often advise people to set aside their cash for GST in an offset account attached to a mortgage. It will decrease your interest bill on the mortgage and you can easily pull it out when it’s time to pay the GST.

3. Assemble Fringe Benefit Tax concession documents

The key to smooth claims is good documentation. Assemble vehicle log books, entertainment expenses, travel diaries or evidence of other expenses (company gym memberships, for example). The type of document depends on what you’re claiming, so look into the rules.

4. Check super contributions are up to date

There are penalties for not meeting super obligations. This can be a fine of $10,500 or 12 months in prison, neither of which is a good option. How to arrange super payments varies from business to business. It can be paid monthly but often it’s paid quarterly to keep up the business cashflow. Regardless of when it’s paid, accounting for it is essential. Having a system, like Xero, makes super obligations easily visible. If the money hasn’t been set aside for super payments it can mean a significant cashflow impact on the business when it’s time to pay.

5. Check for changes, concessions and deductions

The rules about tax concessions and deductions change year to year. The more you know about what you’re eligible for, the better. Check up on rules for deductions for small businesses for things like start-up costs, legal and accounting advice. Or, the rules around whether you need to do a stocktake if you haven’t moved more than $5000 of stock.

Expenses for running a business are well known deductions but are worth checking up on. The basic rules are that the expense must be for the business; if used privately then claim only a portion of the expense; and you need records.

There are also reporting rules that might be relevant to your business. For example, employers with 20 or more employees are required to report through Single Touch Payroll unless granted an exemption. Also, the rules on whether you need to pay GST can change.

6. Get the help and support you need

Making mistakes can become very expensive for small businesses. And the complex and changing tax rules don’t help. The government has many resources for anyone trying to make sense of the system. There are webinars and workshops, live chat and call back services and assistance programs.

The Australian Tax Office website also has several tools for you to plug your information into if you’re curious about eligibility. These tools don’t take the place of a registered tax agent but can help.

Yes, this is a strange time in our history. Yes, there is a lot of uncertainty about what the world, our economies and our borders will look like when the dust has settled. And yes, sure as the sun will rise tomorrow tax time will come around. The situation may be fluid and what you had planned for your business may change. But the fact that you need to have your documents organised and ready to file is one clear certainty.

Helen Baker, licenced financial adviser and author of “One Your Own Two Feet: Steady steps to women’s financial independence”

This story first appeared in issue 29 of the Inside Small Business quarterly magazine

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