Call in the experts!

Starting a business after becoming qualified is often the biggest move in a builder’s career, yet it is often handled poorly. Our advice? Listen to the experts – it could be the best advice you get.

The most crucial question any businessperson must ask themself is: where do I want to end up?

Businesses’ life cycles (as shown in Fig 1) invariably follow the same course; and while some arrive at key points at different times, the overall cycle remains the same.

Without an end goal in mind, even the best business ideas will meander along without achieving any great success. That may leave the owner unable to sell the business – not a great result for a lifetime of work!

The potential cost to a business owner of simply shutting up shop is immeasurable, especially if the business had great potential and a strong name, brand or customer base to be carried on by a new owner. Not to mention that any value built into a business at sale time is currently a tax-free capital gain! For these reasons, an exit strategy needs to be formulated at the same time as your entry strategy.

Laying the foundations for success

While visualising the end is important, it is also critical to have the right advisors around you before you get too far down the track.

The first step any new business owner should take is to engage an accountant. Putting aside the statutory requirements of preparing financial statements and tax returns each year, the right accountant can often be your most trusted ally and the key connection between the advisors discussed further on.

Any funding application with the input of an accountant on year-end financial statements – as well as forecasted results – will consistently have a better chance of achieving the funding that you seek. They can also help you set your systems up and ensure you have the foundations in place for a strong performance.

Accountants can also take the role of business coach, being a valuable sounding board for any financial decisions that the business needs to make, as well as a mentor to help you cover off the challenges that arise along the business’ lifetime.

Due to the inherent risks associated with owning and operating a business, you will also require the services of a lawyer at some point. The best time to get one on board is right from the beginning, rather than waiting for something to go wrong.

A lawyer who knows your business inside out, has a strong working relationship with you, and can see any potential issues arising before they occur can often be the difference between a hefty lawsuit and a minor inconvenience. They can also help you to structure your affairs correctly, minimising the impact on your personal assets (such as the family home) should the worst happen.

Continuing along the advisor theme, the final piece in any business puzzle is liaising with a business banker to structure your affairs in the most advantageous way. Even if it just means you have a standard business account set up, the relationship that you form with your banker is one that will last for a very long time.

They will enable you to make key decisions around the funding structure of the business; in particular, whether you will be funding this from your own pocket or with banking finance.

One step at a time

Once you have your team in place, there are many other decisions to be made and challenges to overcome, such as:

• Should I draw a salary in the first year?
• How do I set my prices?
• Who are my customers?
• Should I set aside some cash for the tax bills I have coming up?
• Should I be employing some people to help me out?

All of these queries have considerable ramifications if you get them wrong and not everyone has the expertise to answer every question on their own. It is for these reasons that you need to build your team before you get too far down the track. The analogy of the ambulance waiting at the bottom of a cliff can be completely avoided if you have someone to lend a hand at the top.

Successful businesses, no matter what the industry, all have one thing in common – they have strong working relationships with the above three advisor groups.

To decipher where you are on your business journey, visit our interactive business framework crowehorwath.co.nz/business-solutions and see what levers and business skills you should factor in to fulfil your business’ true potential.

If you have questions about starting up your own business, or if you are looking to build your advisory team, please contact Ryan Watt at ryan.watt@crowehorwath.co.nz; or contact your local Crowe Horwath advisor.

For the contact details of your local office, please visit:

www.crowehorwath.co.nz/locations or phone 0800 494 569.