1. Set a realistic budget for your business and review regularly
This should include a market salary for the time you spend in your business, which you can assess through job market research to understand how much it would cost to ‘replace yourself’. You should aim to create a business model that generates a profit after paying your salary, rather than viewing your business profit as your salary. Your business should be regarded as an asset and the profit represents the ROI for the ‘risk’ you take as a business owner.
2. Review your pricing strategy
Have you assessed the total cost of delivering your product or service? Don’t write-off time spent in business development and admin as expenses, it all adds up to the time you invest in the business and your pricing needs to reflect this. Consider whether there is enough mark up on your cost to achieve a net profit after all operation expenses have been accounted for.
3. Research tax legislation that may affect concessions
Slight adjustments here could make a huge difference. For example, in the 2016/17 financial year, the small business turnover threshold increased from $2 million to $10 million. This provides an enormous opportunity to grow without losing the concessions available. The $20,000 small business tax write-off was also another opportunity to take advantage of for upgrading business resources.
4. Sharpen up your financial acumen
As an SME, you will have enormous passion and knowledge about the products and services you deliver, but usually the financial side can fall-down due to a lack of understanding and specialisation in this space. If there’s one thing you do this financial year, I would advocate you take the time to improve your financial literacy, as this is the most common downfall in every SME I mentor. Ensure every financial decision you make in the coming year is informed, strategic, and based on an understanding of your true financial position. Not a gut feel or what’s in your bank account.
5. Project ahead and have a clear cashflow plan mapped out
To avoid a cashflow crisis, it’s critical you project at least 12 weeks into the future. Make it a part of your weekly process to review, track and forecast your cashflow – as well as your Profit and Loss statement and Balance Sheet. Start your 2017/18 financial year with a clear goal to be fiscally fitter by embedding healthy financial habits in your business.
Listen to the podcast
It was fun sharing my New (Financial) Year tips with David Koch in his 'The Daily Drive' Podcast. Click the image below to listen >>>