Operating a successful business is not rocket science but there are a number of things to keep in mind:
A well managed business can fund your retirement as well as give you a good living for many years. Ensure you give yourself the best possible chance of success.
- Line of Business. You've a much better chance of success if you're in a line of business where there are barriers to entry e.g. it requires a qualification, know-how, or you need a lot of money to set-up the business.
- Avoiding Excessive Risks. Being in business can be risky but there's no point in placing the wellbeing of your family in dire risk. There are many who buy an existing business without doing their homework, who lack adequate working capital or assume unrealistic levels of sales or profit.
- Not Over-Borrowing. There is good and bad debt and debt which is just plain crazy. Take, for example, those local businesses who borrow $50-$100k from the IRD without formal arrangements or use credit cards or so-called "interest-free" deals. Not only is it hard to catch up but they'll break the bank.
- Reserves. That rainy day might be around the corner and it's non sensible to operate without reserves. If you can't save up an emergency cash fund at least make sure you have an unused credit facility available.
- Planning. If you're an established business you don't necessarily need a thick business plan (although that helps too) but you do need to know your break-even point, a budget and a cashflow forecast. I find that a business owner understands their business much better if they're involved in these areas.
If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail me at email@example.com. The information in this article is of a general nature and should not be relied upon as a substitute for specific advice.
Important: This is not advice. Readers should not act solely on the basis of the material contained in this fact sheet which consists of general comments only and do not constitute or convey advice per se. Changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. We believe the contents to be true and accurate as at the date of writing but can give no assurances or warranty regarding the accuracy, currency or applicability of any of the contents.