Do You Have Multiple "Teams" Of Income?
One of the stages within the B.O.S.S Steps is called STAR. Now in the STAR phase, you get a true sense of freedom. It’s somewhere between $350 and $800 K. Now, you can sit at the $350 – sometimes it’s a touch more than that to $400, and you can be on that borderline.
But at this point here you now have a team that can do the promotion for you: they can do the promotions, the marketing, and they can sell. The big shift in here is that you have a team that can sell being without you. Once you can unlock that part there, you now have a massive amount of scale that kicks into the business – this is a great phase. At this phase here, this is usually where we see a lot of our business that we coach get gobbled up by someone else, or they get a proposal to sell their business and they usually don’t have to work ever again from there.
So this is a cool phase to be in business.
The next phase is what we call SUCCESS, and that’s when you hit into the $800 K + and you’ve got your own flow. Now the truth is, you can achieve some of that in STAR, you’ve just got to make sure you nail the part in STAR. And particularly when you’re in this HERD phase, you’re now in the harvest but you’re harvesting because you’ve now built a team.
You may have heard of the term “multiple streams of income”. The only thing is it’s a little misleading, but it sells books. But here’s the truth: If you want to do this properly, the way that’s sustainable, is not about multiple streams of income – It’s about having multiple teams of income. The important part here is your ability as a leader to master the ability to grow the team to do this.
You build one business, then you can build a second business – you can have multiple teams that are working within that.
Watch the full webinar replay at https://learning.benwalker.com/courses/how-to-navigate-2021
Chattel Mortgage Vs. Finance Lease
I was on a webinar recently with Ashley Smith from ASA finance group, and here’s what he had to say in regards to Chattel Mortgage vs. Finance Lease for vehicle finance –
Ashley: 98% of the stuff I write is a chattel mortgage. Finance lease is a little outdated. I can’t comment on the tax side of things, but just one thing that you’ll notice with the finance lease is that with the GST on a chattel, you can claim back the GST immediately in your next BAS. With a finance lease, you’re claiming back the GST every month over the terminal line, and that’s not always a desirable outcome for some clients. So that’s the first thing.
The other thing with the finance lease, It’s typically not something we do with the major lenders. The chattel mortgage have the cheapest rates. The best way we see to go is through a chattel, not a finance lease.
Watch the full webinar FREE on my e-learning page at https://learning.benwalker.com/courses/asset-finance
Can You Delay Assets If You've Only Made A Minimal Profit?
During a recent webinar, one of our viewers asked “If I have only made a minimal profit in 2021, can I delay the asset write off to 2022 when my business is more profitable and there’s more to write off?”
My answer: I guess in a way that depends – it depends on when you purchase and receive that asset, because technically if you use the small business depreciation rules, you have to use them all. You’ve got the option whether you claim the remaining assets in your business pool (and this is a hectic tax thing right now I’m going into) but before this huge write-off came into play, what we do is we’d write off all of your remaining assets over a number of different years and we claim 30% a year for the pool of your assets.
Now, in last financial year and in this financial year, we were able to claim the whole lot if it was under a certain value – now it’s under an unlimited value, and what that means is you do have the option to write off the pool or not. If you do have a low income year, it may not make sense to write off that pool.
But back to the original question; if you buy new assets, you still should be depreciating them under the small business rules. And that might mean if you haven’t bought the asset yet, maybe wait until next year to receive it.
Watch the full webinar at https://learning.benwalker.com/courses/asset-finance
Interest Rates In Asset Finance Are On The Rise
Traditionally I would say we’ve been in a declining rate market for between roughly six to eight years. Rates have been coming off, which is great news – everyone keeps being told to renegotiate their rates around home loans and all these other things.
The reality is, rates are pretty much as low as they’re ever going to go – this is where we’re at. We saw an increase in rates for 25 basis points earlier in 2021. Now the thing to remember with asset finances is they’re fixed term fixed contracts, so typical terms would be three, four or five years – we don’t write anything longer than five years as It’s a poor outcome for the client, typically.
So what’s happening is while the RBA is releasing data claiming to not be looking to a hike rates again until 2024, it has to be kept in mind that if you take out an asset finance deal now,with a view that it will end in five years from now taking you through to 2026, the rate will not be the same for the finance year. So what they need to do is they need to factor in essentially what they feel rates are – and without going into a full explanation around money markets and how banks acquire money and rates and all these things – but typically there’s a yield curve, what we call the back end – so 5, 10, 15, 20 year rates and bonds where banks trade money to each other essentially.
The yield curve, as we would call it when, what we call bid, so it increased. And it increased in the back end in the 5, 10, 15 years space, purely because people know rates are going to increase. And actually, it hiked prior to that period – so started hiking in a two or three years space. It went up sooner than what the RBA is claiming that rates will increase. So whilst the RBA’s saying they think it will go up in 2024, the banks don’t believe that to be true. We are all expecting rates to hike sooner than that, and the reason behind that is because of a rapid decrease in unemployment, we’’re seeing it accelerating faster than we expected. We’re seeing GDP shoot up faster than expected, and the economy is looking in much better shape than what we first thought.
Obviously tourism, retail and hospitality are industries that are still struggling and they’re still rebounding, but if we look at construction infrastructure spending and all these other areas, that is rebounding rapidly. That, in turn, is creating positive market sentiment which in turn is driving an increase in interest rates.
So we expect the market to rebound faster which in turn will dictate to the RBA it is now time to start increasing the cost of funds, which in turn will have an impact on your loan.
Watch the full webinar on my e-learning page at https://learning.benwalker.com/courses/asset-finance
Why Every Business Needs A War Chest
We strongly recommend that every business has a war chest – there’s many authors, business writers and even personal finance writers who suggest something like this as well. A war chest is basically an emergency fund, where you’ve got – for example – three months’ worth of your business’s recurring expenses in cash, just sitting there ready to go. We call this your war chest, or your rainy day fund – there’s so many names for it. It’s basically peace of mind to know that even if you had to shut the doors and there was no stimulus, and there was no revenue from clients (which is a pretty bad position, right? When we’ve got such a digital world, it’s a pretty unlikely situation) but you’ve still got your own self-funded insurance policy sitting there in a bank account.
Our recommendation to clients is work out what your monthly recurring expenses are (including your own salary, so you’ve got food to put on the table) and start saving towards having three months of that ready. Not everyone does that, but we’ve been saying that for years now. I’m certain, nowhere near all of our clients have done that.
Listen to the full interview at https://podcasts.apple.com/au/podcast/ben-walker-talks-about-accounting-and-his-journey/id1507070881?i=1000510718910
Why Businesses Stay Stuck In The Startup Phase
When you first build your business, you’re going to experience the first step, which is what we call the “start-up phase”.
As a guide, the start-up phase is somewhere between 0 to $10,000 a month. If you’re in construction, retail, restaurants and cafes and that space, then this still applies to you – the only little difference is this 0 to 10k is your gross profit, not your revenue. But for everyone else, if you’re in a service business of any sort, then this will be your revenue. So for everyone else, like in construction, or anyone who has large cost of goods sold, then for you guys, that’s your GP or gross profit. And by the way, you could be a startup, and be in business for many, many years.
So in the start up phase, you’re a little bit stuck – there’s a little bit of “oh, It’s life and death” in many ways. Having said that, it’s actually a little bit fun, It’s relatively new, or you could be excited. The principal here – this is the thing that you need, that is important to be nailed if you’re stuck in this early stage – is to learn how to create a proven concept.
How do you create something that will sell in the marketplace? So, it’s an iterative process, where you go out and you create something, you build something, you put it to market, and then you test it and come back. It’s the speed of evolutions on your ability to do that, that is the key.
Where I see people get stuck, is they’re far too slow. They go out, and say “I’m going to build this thing, and I need to get my website perfect – I need my colours just to be for who it’s standing for, who I am, my website needs to be perfect, and now I need to do a blog.”
And then you know what? Business has passed you by. And these next eight months or so you’ve missed the boat.
It’s not the time to do that in this place here. You’ve got to be in the marketplace, you’ve got to be in presenting your amazing value to the marketplace as often as you possibly can.
So, it’s a combination of product development and getting out there, and discussing it with people in the general public, or wherever your ideal client is. As you do that you may think “you know what? I don’t really like working with those people. These are the people, these are my peeps. These are the ones I want to work with.” That’s what happens in this stuck-phase in startup.
Watch the full webinar replay at https://learning.benwalker.com/courses/how-to-navigate-2021
The #1 Challenge For Most Entrepreneurs
For most business owners/entrepreneurs, their biggest challenge is scaling their business. Now, a lot of people don’t understand what scaling really means – the goal is to build an asset.
Just to be clear on this, you’ve got an accountant with you, so you’re going to be having a balance sheet discussion with them coming up very soon and to discuss pre-tax planning, if you haven’t already done so. When we’re talking about an asset, think of it like a property asset for a moment: you’ve got a house, you’ve got a building that you invest some money, you may invest some time, put some energy of some sort into it, then over a period of time it will be giving you a cash flow. It will give you something else off the back end, and there will hopefully be an increase in the value and the valuation of the property. That should be the same for a business as well, because the goal is to build an asset that can run independently of the owner.
Now I know someone’s going to say “But I love what I do, this is what I was meant to be doing, I’m going great.” That’s perfect, you can still do it, but the difference is you don’t have to do it. You do it because you choose to do it and you only do the parts that you want to. And here’s the kicker, this may have a little bit of curry powder with it so bear with me on this one: until you achieve that, you’ve really just got a job. It could be a very high paid job or it could be a low paid job, but just understand that it’s still a job.
Watch the full webinar replay at https://learning.benwalker.com/courses/how-to-navigate-2021
Why Acquire A Business?
I was speaking with a business owner recently and we’d had discussions around prepping for exit over a few months, and I’d just mentioned acquisition, and he’d been thinking about it anyway. So last week, he spoke to me and he said, “Do you know what? I’ve decided to put on hold exit for another six months, because I just decided I’d been looking at this business that was really a simple thing to acquire, and I’ve suddenly realised, I’m selling for a four-times multiple at the moment”.
When we talk about multiple, we’re talking about the way to value business. But one of the ways to link to the way to value business, it’s always some sort of calculations, so that might be profit or EBITDAR, multiplied by a number. And that number that we multiplying it by, we call the multiple. But the point is it’s not just the profit that drives value – It’s the multiplier that you add to the profit, and it’s a game changer.
This is a powerful example of adding value by looking at your multiplier. So what this guy did – who’s got a really good business and he’s looking at a multiplier for around four, maybe five – he realised that he could buy this business for a multiple of one. He knew, and he calculated it straightaway: he can buy that business for a multiple of one, roll it in, and when he sells it he’s now going to get an uplift in that acquisition from a multiple of one to a multiple of four or five.
That’s an immediate uplift in value.
I like to think of it like this: when we were kids, we probably played Snakes and Ladders – you’re rolling the dice, you get four. You then move your piece along four squares. Then you roll a six, and you’re slowly making your way there. If you land on a ladder, you skip rows.
Watch the full webinar replay at https://learning.benwalker.com/courses/acquiring-a-business
Let's Talk About The Tax Impact Of Covid Stimulus Measures
Lets talk about the tax impact of COVID stimulus measures.
There were two main stimulus measures which were announced last year, one of which was the “cashflow boost” – that’s if you employ someone including yourself. Certainly it didn’t really matter as long as the business employed someone, then you’re entitled to what they call the “cash flow boost”. Now, that was anywhere between $20,000 up to $100,000, depending on how much pay-as-you-go tax that you withheld from your team members.
The great thing about this measure is there’s no income tax on that amount – It’s not assessable income, which is amazing. So if you’re one of the people who received $100,000 boost and think that they need to put $30,000 aside for tax, you don’t need to.
The second one here is JobKeeper – there is tax on JobKeeper. So the thought process there is you had the expense of wages, you had income to supplement that. And so you net the two off so that there is tax to consider. So the JobKeeper amount does actually count towards your other income for the year.
Quite frankly the JobKeeper essentially, it’s a supplement to your wage bill. Now, if you receive $100, you pay $100, you pay no tax – It’s in and out. But if you receive $100 and then you pay $100, but then because of that, you receive more income on top of that, that’s what is taxed on it.
So it’s a bit confusing when you say JobKeeper is tax but really it’s the outcome of supplementing your wages creates more profit because you have less expenses for the year, essentially.
Learn more about Tax Planning and the 12 things you need to consider to legall reduce your tax bill in 2021 – Visit https://learning.benwalker.com/courses/TaxPlanning2021
Why You Shouldn't DIY Your Bookkeeping
Business owners shouldn’t DIY their own bookkeeping. Similarly, I’m not the best person to go and rewire my house for electricity or the wires. I’m probably going to end up killing myself if I was to do that, or harm my family, or the house would burn down at some stage.
So I want to encourage you, if you’re DIY in your bookkeeping – yes, we might have given you some guidance on that, or you might’ve done a course or something like that – but DIY is one of the worst things you can do as a business owner when it comes to bookkeeping. From an element of, “you’re not the best person to be doing it” and “you’re probably not a trained bookkeeper either” – that’s one element of it, and the other element of it is the opportunity cost.
So, we had a client who was a doctor. In an hour, he could easily earn $120 to $150 if he was seeing patients. He was doing his bookkeeping, which you can outsource for much less than that. If we look at opportunity costs, it would pay for itself if he was seeing clients instead of doing his bookkeeping, and it would probably be more accurate. So, it would save rework or more expensive bookkeeping or accounting fix ups.
So please keep in mind, do not DIY your bookkeeping. If this stands out to you to say, “Hey, I’m kind of doing that, if I was honest with myself,” then please consider doing something about it.
Learn the 5 steps on how to take Total Financial Control. Watch the full webinar replay at https://insp.red/TFCreplay
Get Cashed Up
