With Good Equity in your Home and a burning desire to do your own thing, many will launch into their own business. Many who do will not have done a Budget.
You need to add up the realistic cost and reward for you are about to do. Whatever it is, throw some realistic numbers into our Money Buckets Business Budget.
Does the Business provide enough cash flow and profit to pay your Living costs and the business costs? Be realistic. When you did that, did you allow for Tax on your own drawings and GST on the business Turnover? That will come as a major Financial shock to your Finances around that 2-year mark. That’s one of the reasons why so many businesses’ fail in the first 3 years.
You need to have set up your finances to fund this before you need it and start a business. Trying to get extra money, particularly for unpaid Tax is a high-Interest affair. Especially short term Business Loans. Its always easier to have funding put in place when there are no Financial Problems.
30% of all new starts in business or as Sole traders (The numbers are similar for both) will fail in the first year. This will rise to over 60% in three years and over two thirds in 5 years.
Most will have to endure a period of time when their business doesn’t even provide a minimum wage. This can go on for an extended period of time, sometimes years. Many will work for nothing for years. Many will lose all equity in their home and have to start again. Many will lose their Super starting a small business after they retire.
Shopping Centres and Franchises are notorious for putting people into this position. They rely on the dream of owning your own business and you not doing your homework. You really need to keep your eyes and ears open and do your research. If it’s a Franchise you must talk to previous Franchisees to see what it was like. Do not throw your Super and Home Equity away because you didn’t do a realistic Budget.
Really ask the question, is running a business for you. Are you going to be able to handle Payrolls, Workers Comp and Business Insurance? Handling staff and employment issues, paying tax and Super for people. There are large fines and penalties if you don’t. Running a business is more than just being passionate about your field. Unfortunately, you need to be able to handle your financial responsibility as well. Otherwise, do you have a partner or resource that can make sure you cover this?
Personal Guarantees and Home repossessions are enforced on a regular Basis by Landlords, Lenders and the Tax Department. If it all goes wrong, they will take your home and business and anyone’s who has a personal guarantee against the loan. It is an everyday business fact of life. Don’t think it won’t happen if things go wrong. Remember, this will happen to two-thirds of Small Business starts. Money Buckets can often find solutions to help keep homes at this stage, but not always.
However, get it right and it can be extremely satisfying and rewarding. But you need to be going in with your eyes open and your numbers adding up. If it doesn’t add up don’t do it.
It is imperative you budget and review your position at least every month. Our small Business Budget can be amended and saved at the end of every month to actual figures. This can keep you on track before you get to see your accountant. Getting figures on your business 12months after the fact is all too late. If there is a problem you need to know now.
Need help, call Money Buckets on 1800 825 010 at any stage of the Business.
Customer Enquiries: 1800 825 010
Admin Office: 0243696287
Post: PO Box 6100, Kincumber, NSW, 2251
Money Buckets ™ is a Trademark of Starlight Home Loans T/as Fast Debt Help
ABN: 94 145 613 056
Credit Lic 388809
MFAA membership 319292
Affiliates: Second Step Administration RDAA 1668
The Rite Place Pty Ltd trading as Debtrite