Right , so you have settled on a name for your business and picked out the décor for your new offices, but how do you make sure that your business lasts longer than your newly printed business cards?
Antonie van der Hoek, Partner at BDO Business Services’ Cape Town office, has put together twelve golden rules to follow to ensure that you remain in business for the long haul.
1. The primary financial objective of a business is to maximise after-tax free cash flow. It is one thing to be turning over impressive figures, but do you know what surplus cah you are really making after you have paid the tax man?
2. To incur expenditure to save tax alone is not a rational business decision. Yes, you may be able to claim on certain purchases you make, but you are still going to have to find the money to pay for them.
3. A motor vehicle is not an investment. We all know it, even though we all like the excitement of a new car parked in the garage. However, cars depreciate and the opportunity cost is huge.
4. You are effectively selling time – so to free up more of it, learn to delegate effectively. There are many highly-skilled and competent people out there who will be able to administer areas of your business that you don’t need to. Although you may be paying another salary or incur an outsourcing cost, freeing up your time to do what you do best will ultimately be of benefit to your business.
5. Use technology effectively to save time. As with point four, technology is there to help you grow your business. Appropriately automated processes will help you produce services and products faster, more effectively and with less human error.
6. Cash is KING – make someone responsible for preparing invoices and collecting debt timeously. Many potentially successful enterprises have floundered simply by overlooking this basic rule.
7. To know your business is to approve the payments. While delegating can be a positive thing, it is imperative that you have ultimate financial control. Not only will it minimise the risk of any fraudulent activities but you will also have an accurate idea of how your company is doing, where the majority of your expenses lie and how you can potentially reduce unnecessary costs.
8. Keep strict time records of your business activities. Time is money. Monitor where you are spending the majority of your time. This could be key in determining where you can make improvements to the operation of your business.
9. Pay your creditors on time. Not only does this eliminate unnecessary penalties or interest, but you never know when you may need their help next! You could also negotiate a discount for early payments.
10. Maintain a positive bank balance equal to 3 – 6 months of overhead costs. Cash flow is the lifeblood of any company and it is an area that can cause you the greatest stress.
11. Always budget to make a profit. Don’t be afraid to think big and be confident. As they say, “you’ve got to be in it to win it”.
12. Business is not unlike a game. Take time out to strategise and think of ways to improve your business. And above all, have fun!
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