The 2nd Step to Business Mastery…..Structure

Structure

‘I thrive in structure. I drown in chaos.’ – Anna Kendrick

Building and property development relies heavily on laying a strong foundation.

As you know, the foundation is the most important part of the entire structure. It holds it all together. The ground on which we all stand is not as sound and solid as most of us think, so a properly built foundation is essential for supporting buildings over the shifting land beneath them.
If the foundation is weak, it will fail. When it does, cracks will appear internally and externally. Windows and doors will become misaligned. Floors will become uneven, slope and even crack. These problems multiply as you go up to the next floor and so on. The result? Disaster.
While the foundation itself will differ depending on whether you are building a single storey property or a multi-level development, every job needs the strongest foundation for its particular purpose.

It is no different when it comes to your business – you need the right foundation for your needs.

Whether you are in carpentry, electrical or plumbing; residential, commercial or industrial properties; a sole business owner or in a partnership and more. The same principle applies: you need the right structure. The benefits of having the right structure are that it saves you money by reducing the amount of tax you need to pay; it gives you flexibility when it comes to distributing profits and adding or removing partners; it enables you to grow without any adverse effects; and it gives you peace of mind, knowing that you are set up not only for today, but for well into the future. If you don’t have the right structure, on the other hand, it could cost you your business. Ideally, you want to get your business structure right from the beginning.
To do this, first you need to understand what your options are. Second, you need to know about the key considerations that you should keep in mind when choosing the right structure for you.

The basic structures are as follows:

Individuals. This is when you run your business as a sole trader, holding your ABN in your own name. This is the simplest ownership structure and is how most businesses get started. This structure would suit the smaller business where it is essentially just you and the net profit you generate is less than $80,000 per annum.

Partnerships. A partnership is when two or more parties join forces to establish a business. A partnership is a formal agreement and requires its own ABN, tax file number and tax return. However, it doesn’t pay tax, as any income it generates is divided between the partners and recorded as a part of their personal income. Similar to the Individual structure, only spread across the partners.

Companies. A company is a structure that is usually used for businesses, with one of the main benefits of this structure being the tax on profits. The general company tax rate is 30 per cent, however, the company tax rate for small businesses (businesses with aggregated turnover of less than $2 million) is only 28.5 per cent. Please note: the government has announced a reduction in the small business tax rate from 28.5 per cent to 27.5 per cent for the 2016–17 income year. The turnover threshold to qualify for the lower rate will start at $10 million. For this reason, it is a popular choice for businesses with high levels of income. It also provides flexibility in the number of owners, otherwise known as shareholders.

Trusts. A trust is similar to a partnership or a company, in that it’s a separate legal entity used to own assets and/or operate a business, so requires its own tax file number and tax return. Any income generated is distributed to beneficiaries, which is then recorded as part of their personal income. While there are different types of trusts, the most popular is the discretionary trust, otherwise referred to as a family trust. This particular trust has added tax benefits, as you have the discretion to distribute the net income any way you wish and therefore can choose to give more income to beneficiaries who are on the lower tax rates. In addition, the incorporation of a company trustee will provide personal asset protection.

Superannuation funds. The final option is running your business through a self-managed superannuation fund (SMSF). An SMSF is not prohibited from running a business, however, there are many activities that are prohibited or limited when operating under this structure. Many of the mainstream business types in building and construction are not suitable for this type of structure. However, a property development business that is operated for the sole purpose of providing retirement benefits for the members might be suitable. Even still, due to the significant legal restrictions, I would strongly recommend seeking specialist advice if considering operating such a business within a self-managed superannuation fund.

So how do you know which structure you need? There are a number of factors to consider when choosing a structure. Some of the key ones are as follows:

• Asset protection
• Tax minimisation
• Control
• Active or passive income
• Cost
• Ease of administration
• Adaptability
• Succession planning

Generally, the structure should take care of itself, as long as all the above factors have been considered.

It is all detailed in my book, http://www.buildit-book.com.au/. Take a look now.

The 1st Step to Business Mastery is…..Strategy

Strategy

‘If you fail to plan, you are planning to fail.’ – Benjamin Franklin

Every time I jump in my car to drive to a new destination, I have two options.
The first is to start driving and hope for the best. Unsurprisingly, that rarely ends well.
The second is to make a plan.

The good thing is I can use the navigation system in my car to help.
In my navigation system, I first program my desired destination, or where I want to go. Using GPS, the system then figures out my starting point, or where I am now. Once it has these two points, it will calculate the best route and it will tell me how to get to my destination.
Travelling through the journey of business is similar to driving a car. You must first determine your destination. You must first ask yourself, ‘What do I really want?’ or ‘Where do I really want to go?’

You do this by creating a strategic plan.

A strategic plan will allow you to be in a position to control outcomes. Why?
Because you have a clear direction and focus.
This control will allow you to manage change and put the necessary steps in place to achieve what you want done. Why?
Because it’s an on-going process, not something you do once and then just forget about.
A strategic plan will provide you with better awareness of what’s needed and therefore the opportunity to influence the future. Why?
Because you are living it every day.
All your business decisions should be based upon your strategic plan. If they aren’t, your likely to veer off track and end up somewhere else (that is, not where you wanted to be).

A good idea is just that – an idea. A strategic plan can turn that idea into reality. It’s the ‘how to’ in the process, while the idea is the ‘what’. The strategic plan gives you clarity in not only the ‘what’, but also the ‘how’. It’s when the business gets real and actually starts to do things that you want and that’s what makes a difference.

You will lose valuable momentum and lead time if you are reactive rather than proactive. The strategic plan helps you establish what needs to be done and when, so you can take the right actions when necessary, rather than waiting for opportunities to come to you (or running around fighting fires as they flare up). Ultimately, you’ll be able to achieve your goals faster.

So how do you create a strategic plan? Just as when you’re plotting your path to a new destination, your strategic plan should cover:
• Where are you going?
• Where are you now?
• How will you get to your destination?

The foundation of your ideal strategic plan will confirm your purpose, your goals and your objectives (where am I going?). It will ensure you understand the current state of play (where am I now?). It will encourage you to analyse the current environment and finally, it will set the right path to success (how will I get there?).

Do it and you won’t look back.

It is all detailed in my book, http://www.buildit-book.com.au/. Take a look now.