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Tweetables:
Create something that is indestructible. [Click To Tweet].
Protect your business. [Click To Tweet].
Always have two of everything. [Click To Tweet].
Consider getting a fast start. [Click To Tweet].
Own the racecourse and stay in control. [Click To Tweet].
Do you prefer text? here you go…
James Schramko here with another Wealthification module.
Think Long Term
We’re talking about structure and this is making sure that your business is on very solid footings and that it’s going to be around for a long time. You want to create something that is indestructible. So, what are we talking about here? One thing is your tax structure. It’s really important to see an accountant so that you get the right entity to trade under because at some point, you may want to sell the business and in each country there are different regulations but certainly in my country when you go to sell your business, you will have tax implications. You might even want to decide to put your business in a different country. Now, I certainly can’t give you advice on this but your accountant can. And the whole point is we’re assuming that you want to build a valuable and profitable business here and you actually want to keep some of the money should you earn a high cash flow. You want to be able to manage that money and keep some of it. And also, if you want to sell the business, then you also want to work out how much you’re going to get to keep and how much you have to pay in tax.
There’s a lot of implications and the bigger the numbers you get, the more valuable this information becomes. Don’t leave it too late because with tax, one of the interesting things is if the taxation department were to feel that you might have restructured things in an effort to pay less tax for example, they might want to look at the timing of it and they may treat your company differently. So, you have to be very careful when it comes to taxation planning.
Protection And Insurance
Another essential thing is to have the right legal entity. This is primarily because you want to keep your assets. There are people out there who specifically seek out to sue other companies. They may want to put in a claim. They may want to spend money to pursue you so you want to make sure that you see a lawyer and get the right legal entity in place. One thing that I know from my point of view is I would be very uncomfortable operating as a sole trader because you have maximum exposure if something goes wrong and that is something you do not want.
So at the very minimum, you want to speak to a legal person and your taxation person and get the right entity so that you have some sort of protection. Alongside that you want to get insurance and that is because things happen. There could be a disaster, you could have a technology meltdown, you could have a job go pear-shaped. One way to protect the little bit is not only with an insurance policy and you can speak to a broker to get a good policy. The other thing is to make sure that you’re not single point sensitive anywhere in the business, so it’s kind of a preventative insurance.
I like to have two of everything – two computers, two internet connections, two people in my team who can do every job. That way if something happens, then I have a little bit of backup right there. So, I have my first layer of backup that I’m investing in my insurance against disaster is actually very low cost compared to what could happen if I was running it too lean and taking too much risk.
Another Option To Consider When Setting Up A Business
Another thing you might want to do when you’re setting up your business is consider could you actually buy somebody else’s, just give them some money and get a fast start because perhaps you could reinvest pre-taxed dollars to increase your asset holding therefore reducing your tax, speeding up your asset growth or increasing your customer database. So, you can actually accelerate your growth by buying databases, by buying things during tax year that come off your tax bill. So, there’s a lot of things that you can do instead of just banking a profit. What a lot of big companies do is they take that profit, they reinvest it back into the business and grow the business bigger. Perhaps you could go and buy up a lot of little competitors and make a bigger company and this is a really good business strategy if you’re in that position.
Take Control And Own The Racecourse
Something that is very important is to have control. You want to be in control. I’ve seen people make this error where they build their business in other people’s platforms. I call it making sure you own the racecourse and not just the race horse. If you’re building your business in someone else’s platform, then you are tied to them and if something goes bad with them, then you can go down with it as well. We hear a lot of people who are upset that their business got collapsed because they were dependent on something else. So really, it’s about eliminating compromise. Take control. Have a hundred percent ownership if it’s absolutely possible, do it. You don’t really want venture capitalist funds because growth for the sake of growth is not a good goal. What you want is controlled growth and you’re also in control of it.
When you take someone else’s money, they’re going to want a return on investment which means they’re going to milk the cash cow and they’re going to expect you to do things that are probably not best for the long-term prospects of the business. When it comes to control, if you own the entire business, then you also can get the entire profit and this becomes really important too.
Things that will kill a business are when partners have a disagreement about the direction of a business or one person contributes more than the other. So make sure if you can possibly own the racecourse, you do that.
Saleability
And finally, make sure that your business is saleable. What will be the terms when you want to sell the business? What name is it in? Where is the list of the customer database? What are the bank accounts in? So if you know in advance that you want to sell your business, you should set it up in the beginning as something that you could actually sell. Is it easy to transfer all of the assets to somebody else? Is it easy to identify which liabilities the business has rather than being tied to your personal guarantees, etc.
There’s a lot you can do to make your business saleable and if you follow the tips that I’ve given you, if you have the right tax structure, if you have the right legal entity, if you own the business outright, then there’s a lot of things that are going to be easier for you when it comes to selling the business.
Wealthification is just one of the many courses inside SuperFastBusiness.com. Join me inside this Internet Business coaching community so that I can help you profit faster: Click Here
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