Building your business

Starting a business is a popular option for entrepreneurial Kiwi builders, but it pays to get the right support network together before you jump into it

It’s often the biggest move a builder will make, and yet is quite often the one that’s handled the worst. The apprenticeship is over, you’ve had a few years of experience, become a licensed building practitioner and you want to start working for yourself – where do you start?

The most crucial question any business person has to ask themselves is – where do I want to end up? The life cycle of any business (as shown on below) invariably follows the same course; and while some arrive at key points at different paces, 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, and the business owner may not be able to sell the business at the end of their working lifetime – which is not a great result for a lifetime of work!

The potential cost of simply shutting the doors on a business is immeasurable, especially if it had great potential and a strong name 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.

Surround yourself with the right people

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

1. Accountant

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 below. 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.

“Without an end goal in mind, even the best business ideas will meander along without achieving any great success

They can also help you to set up your systems from the ground up (as highlighted in our June 2014 article), ensuring you have the foundations in place for a strong-performing business. Accountants can also take on the role of business coach, providing a valuable sounding board for any financial decisions that the business needs to make, as well as acting as a mentor to help you cover off the challenges that arise along the way.

2. Lawyer

Due to the inherent risk of working in the construction industry, you will need a lawyer at some point during your business’ lifetime. Rather than waiting for something to go wrong, it’s best to engage one right from the beginning. A lawyer who knows your business inside out, has a strong working relationship with you, and who can see any potential issues arising before they even register, can often be the difference between a hefty lawsuit and a minor inconvenience. They can also help you to structure your affairs correctly, so if the worst does happen, the impact on your personal assets (such as the family home) can be minimised.

3. Banker

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 banking 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 utilising banking finance.

 

Key questions

Once you have your team in place, there are many other areas to cover, decisions to be made in the first year of operations and challenges to overcome. 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? These are but a few questions that will arise in the first year of operating, and beyond.

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’s 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.

If you have questions about starting up your own business, or if you are looking to build your advisory team, please contact Peter van der Heijden at peter.vdh@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.

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