Last night’s Federal Budget announcement had some winners and losers. But a budget deficit of $19.4 billion was always going to mean that there would be little or no good news for small business owners, despite Treasurer Wayne Swan’s emphasis on job creation.

In truth, small business will be left wanting from the lack of any significant measures designed to make doing business easier, reduce costs, improve education, skills and training, or support business and consumer confidence.

Almost everything had been regurgitated as part of the government’s plans to “support business to innovate,” as most measures had already been announced, including the $500 million investment in Industry Innovation Precincts and the $1 billion “Plan for Australian Jobs”

These measures were put forward as “part of our plan to support and create jobs, building on our loss carry-back and instant asset write-off reforms for 3 million small businesses” not yet legislated from last year’s ... Continue reading]]> Last night’s Federal Budget announcement had some winners and losers. But a budget deficit of $19.4 billion was always going to mean that there would be little or no good news for small business owners, despite Treasurer Wayne Swan’s emphasis on job creation.

In truth, small business will be left wanting from the lack of any significant measures designed to make doing business easier, reduce costs, improve education, skills and training, or support business and consumer confidence.

Almost everything had been regurgitated as part of the government’s plans to “support business to innovate,” as most measures had already been announced, including the $500 million investment in Industry Innovation Precincts and the $1 billion “Plan for Australian Jobs”

These measures were put forward as “part of our plan to support and create jobs, building on our loss carry-back and instant asset write-off reforms for 3 million small businesses” not yet legislated from last year’s budget.

Here’s a list of  measures that I believe will affect small business owners negatively:

• Self-education expenses are capped at $2,000 per year. You’ll struggle to find a conference, training initiative or educational course these days where the cost comes in below this figure. Instead of promoting our small business owners and their staff to become smarter and plan for growth, we are doing the opposite.

• Fair Work Australia receives $21.4 million for crackdown on workplace bullying. While I agree with stamping out bullying, much of this will be targeted at small to medium businesses that often struggle when dealing with the reality of a small staff. It can be difficult to manage personalities, and owners may not have the ability, time or finances to fight allegations.

• The ATO will also receive additional funds in order to investigate tax compliance among trusts. This is a structure used by many small business owners in Australia, especially in our rural communities. The budget has allocated $77.8 million over the next four years to improve compliance and to boost its data matching capabilities with third-party information. Last year they tested the data matching by looking at the ownership of luxury boats; this year it may be cars, property or similar items.

• Many small business owners have resorted to the 457 system to replace staff lost to the mining boom, but the budget has delivered a double blow to the 457 visa program. The government will nearly double application fees to $900, and The Fair Work Ombudsman is also set to receive $3.4 million over the next four years to monitor and enforce employer activity among 457 visa holders.

• There will be more upfront checks for startups seeking to register new Australian Business Numbers and an increased business-name registration fee.

There are a few positives for small businesses:

• They have promised $29.4 million in assistance for SME businesses quoting for government services and tenders.

• A further $12.9 million has been put forward to assist businesses in accessing the National Broadband Network.

• In terms of Superannuation, the concessional contribution cap will be increased so that:
  • From 1 July 2013 taxpayers aged 60 and over will have a $35,000 cap; and
  • From 1 July 2014 taxpayers aged 50 and over will have a $35,000 cap.
• The government will guarantee unpaid entitlements for any non-employee/contract workers in the textile, clothing and footwear industries if their employers collapse or go into bankruptcy. The new funding is an extension of the current Fair Entitlements Scheme and will be directed towards any workers who are not currently classified as employees.
• Spending on roads and infrastructure may result in savings for small business owners who need to travel around our cities to work.

• Currently any super fund member hit by excess contributions tax is charged 46.5%, regardless of their marginal tax rate. Now the changes will see excess contributions taxed at an individual’s marginal tax rate plus an interest charge, and individuals will be allowed to withdraw any excess concessional contributions from their fund. Many self-employed have made errors over the last few years, and, by breaching their caps, faced penalty tax at the highest rate. This goes a long way to reaching a fair solution.

• They have also promised funding to standardise the business name registration process.

Most importantly, we did not really see the government reign in spending and deliver a budget that will increase consumer and business confidence. Small business would have traded a lot for some strong leadership.

Oh, and if you are a small business owner planning a family, you have until 31 May by my reckoning to get working, as any later than that, and you will miss out on the baby bonus cut-off nine months later!

Despite the number of interest rate cuts we have had from the Reserve Bank of Australia, Centrelink have only started to reduce the deeming rates. Jenny Macklin, the Minister for Families, Community Services and Indigenous Affairs, announced recently a reduction in the pension deeming rates, effective 20th March 2013.

For those approaching age 65, it might be worth explaining what the deeming rate means. Under our means-tested Age Pension system, a person or a couple’s eligibility for a pension is determined by an assets test and an income test, with the former measuring the level of assets that a person/couple holds, and the latter measuring the level of income that someone receives from their cash, investments and any employment.

Check Centrelink’s website for more details on deeming rates.

The number of changes to superannuation by successive governments has left people a little confused over the limits that apply. One of the changes made last year could mean you are subjected to extra tax if you contribute too much to your super. I’m going to summarise the current rules that apply.

Let’s deal with the main type of contribution first, called the concessional contribution. This is made up of your employer or super guarantee contribution (SGC) of about 9% and also any salary sacrifice you may make.

From the 1st of July 2012, if you are under 65 and you pay more than $25,000 into your superannuation before tax as a concessional contribution, then the amount over the limit will most likely be taxed at 46.5%, paid on your behalf by the super fund.

I say “likely,” as there are some circumstances and one-off forgiveness available, but no one should rely ... Continue reading]]> The number of changes to superannuation by successive governments has left people a little confused over the limits that apply. One of the changes made last year could mean you are subjected to extra tax if you contribute too much to your super. I’m going to summarise the current rules that apply.

Concessional contribution

Let’s deal with the main type of contribution first, called the concessional contribution. This is made up of your employer or super guarantee contribution (SGC) of about 9% and also any salary sacrifice you may make.

From the 1st of July 2012, if you are under 65 and you pay more than $25,000 into your superannuation before tax as a concessional contribution, then the amount over the limit will most likely be taxed at 46.5%, paid on your behalf by the super fund.

I say “likely,” as there are some circumstances and one-off forgiveness available, but no one should rely on that.

The payments to your super fund that are included in the $25,000 concessional cap amount are:

• The compulsory 9% superannuation paid by your employer. (Earnings over $277,777 will exceed the limit on their own. I know this is a problem many of us would like to have)
• Salary sacrifice contributions which are also paid “pre-tax”
• Additional pre-tax contributions made by your employer for items like insurance or SGC on a bonus payment
• If you are self employed, payments that are allowed and you claim as a tax deduction

Non-concessional contribution

You also have the ability to make “after-tax” or non-concessional contributions, and the limit for people under 65 is $150,000 in any one year. Or, you can bring forward 3 years to make a lump sum contribution of up to $450,000.

Once made, you can put no further non-concessional contributions until after the 3 year period, so I always recommend leaving $5,000-$10,000 spare and not use up the whole limit. If you do exceed the limit, then you are looking at 46.5% tax, so be careful.

The payments are included in the $150,000 non-concessional cap amount are:

• Non tax-deductible payments made by your employer to your super fund, for example, voluntary payments and super co-contribution
• Contributions made by your spouse that are eligible for the spouse super contribution tax offset
• Personal contributions that are not claimed as a tax deduction
• Contributions in excess of your concessional (before-tax) contributions cap
• Contributions in excess of your capital gains tax (CGT) cap amount
• Most transfers from foreign super funds, excluding amounts included in your fund’s assessable income

Your super fund administrator will look at the money actually received in any given financial year. Be extra careful and check that super paid on your income from April to June may not be paid until the following financial year. Check last year’s statement too to make sure you have not used up some of your balance already due to a late payment last year.

I don’t recommend last minute payments at the end of June, as the 30^th falls on a Sunday this year. I can assure you many late payments may not appear in your fund until the start of July.

With only $25,000 concessional limit available, we can expect many to make mistakes.It is important not to waste this strategy if you can afford to save money.

If the contribution cap limits are exceeded, then the super fund is obliged to forward to the ATO the appropriate tax on the amounts over the threshold. For concessional contributions that were already taxed at 15%, a balancing payment of 31.5% will be made on the excess over the limits.

For more details, check out this link to the ATO page on Superannuation Contributions Caps.

Until recently, I tended to base retirement planning strategies for clients on a book from the late 90s titled The Prosperous Retirement: Guide to the New Reality by Michael Stein.

Stein divided retirement into 3 stages. Each of these stages affected spending patterns differently, so we could plan for clients’ needs at each stage.

Under the accepted system, the first stage is the Active stage — those first early retirement years when most people are looking to see the world (or at least Australia) and/or engage in other active pursuits. They’ve suddenly got 50-60 more hours per week of free time and are still healthy enough to get out there and make the most of life and opportunities.

The second is the Passive stage — a time when they still look forward to some travel and active pursuits but, with the onset of age-related injuries and illnesses, just not as often as when ... Continue reading]]> Until recently, I tended to base retirement planning strategies for clients on a book from the late 90s titled The Prosperous Retirement: Guide to the New Reality by Michael Stein.

Stein divided retirement into 3 stages. Each of these stages affected spending patterns differently, so we could plan for clients’ needs at each stage.

Under the accepted system, the first stage is the Active stage — those first early retirement years when most people are looking to see the world (or at least Australia) and/or engage in other active pursuits. They’ve suddenly got 50-60 more hours per week of free time and are still healthy enough to get out there and make the most of life and opportunities.

The second is the Passive stage — a time when they still look forward to some travel and active pursuits but, with the onset of age-related injuries and illnesses, just not as often as when they first retired. Maybe they’d take shorter trips around parts of Australia rather than long overseas trips through three countries at a time.

Then, eventually retirees move into the last stage, the Sedentary stage, when physical or mental limitations — or setbacks like the death of a spouse or close friends — lead to a much more sedentary, home-based lifestyle. It may also involve losing independence and increasing dependency on others.

The new stage of retirement

In my experience, I’m seeing a new stage of retirement forming, that can have a major effect on people. This new stage has to be managed carefully.

It happens between just retired and the first stage, the Active stage. I call it the Family Support stage.

This is a stage where more and more newly retired people are finding themselves as almost full-time carers for their grandchildren, meaning they cannot plan to travel, undertake volunteering or pursue personal activities due to commitments they make to help struggling children.

This is not the traditional, one-day-a-week “day with nanny and pop,” but a full on five, sometimes six-days-a-week commitment. Often this commitment comes the added cost of taking care of the grandchildren. The costs may not be recovered from their parents, who are often battling a huge mortgage and/or an expensive lifestyle, so the grandparents pick up the tab and deplete their own savings in doing so. So, you need to plan for this.

This stage is not overly negative, as many people cherish time with their grandchildren and would not swap it for the world. However, as a result, they need to be aware that too much time spent in the initial Family Support stage may mean they miss out completely on the most active years of retirement. Some of us may move into the Passive and Sedentary stages much sooner than expected, and in reality, some of us may not live to reach the later stages.

I usually urge clients to put limits on the commitment to family and put aside “me time” throughout the year for some personal travel and other activities. This does not mean going on holidays with the family to be the babysitters while parents relax.

It is important to put these limits in place at the outset, as kids may come to rely on the arrangements so they are hard to reverse later. If people do not plan, then they can end up at the wrong end of their 70s with no energy left to embark on their dream retirement.

What do you think? What are your arrangements like in the family? Are child care costs bringing you down?

This is the second series of Liam Shorte’s regular column on retirement. Check out his first post on how much you need to retire at 60. He will be writing on Centerlink Age Pension next month. Stay tuned!

Of late, I have been inundated with emails from fund managers, share brokers and economists saying that 2013 will see a surge in the local as well as international share markets, but they caution a short term pull back is due after the recent surge.

One of the main reasons for this optimism is that with interest rates so low, cautious investors are now considering a move back into the share market, albeit mainly into the top 20 blue chip stocks.

These are mostly made up of the banks, insurance companies, a few resources, the non-discretionary spending sectors like Woolworths and Wesfarmers, and the pensioner’s friend Telstra, which has surged.

This may be true, but with rates as high as 4.6% for a one-year term deposit out there (ING Direct), many who were burnt previously might wait until the rate drops to less than 4 before they enter the stock market. Unfortunately, being ... Continue reading]]> Of late, I have been inundated with emails from fund managers, share brokers and economists saying that 2013 will see a surge in the local as well as international share markets, but they caution a short term pull back is due after the recent surge.

One of the main reasons for this optimism is that with interest rates so low, cautious investors are now considering a move back into the share market, albeit mainly into the top 20 blue chip stocks.

These are mostly made up of the banks, insurance companies, a few resources, the non-discretionary spending sectors like Woolworths and Wesfarmers, and the pensioner’s friend Telstra, which has surged.

This may be true, but with rates as high as 4.6% for a one-year term deposit out there (ING Direct), many who were burnt previously might wait until the rate drops to less than 4 before they enter the stock market. Unfortunately, being the last to act often means you will end up entering the stock market as it peaks again.

ASX still far below its peak

There is, on the face of it, a strong case for Australian Equities to gain ground in 2013. We avoided the worst of the global financial crisis (GFC), companies have rebuilt their balance sheets and the dividends currently being paid with franking credits make them a lot more attractive than a term deposit.

Also, the Australian market is still well off its peak before the start of the GFC compared to the US and FTSE. So to get back to pre-global financial crisis, we would need some considerable returns from our share market as the table below shows:

*Peak dates: DOW – 09/10/07, FTSE – 12/10/07 and ASX – 01/11/07,

** Current data as of 23/01/2013

Interpreting the ASX

What that table does not show is that the Dow Jones Index has only 10.83% of its composite stocks in the financial sector and 11.41% in the resources sector, while our ASX 200 has over 38.53% in financials and nearly 25.92% in resources. Financials were the hardest hit globally in the GFC, and they’re still not out of the weather as new capital rules and regulations are implemented. There is also reluctance on behalf of the consumer to borrow and spend, which lowers their profit-making potential.

The very fact that our banks weathered the GFC — thanks to some help from the Government guarantee — may justify reasoning that investors will continue to buy up these stocks as long as the premium above term deposits is so high and looks to remain so for a significant time to come.

The lack of wild swings in the market have also given people some confidence, and indeed the VIX Index —which is a measure of the volatility — is down reasonably low at 12.4, a level that supports the market.

Likewise, China seems to have had a soft landing, and we may see some strength back in our main resources stocks — BHP and RIO, which took a hammering last year — especially if 8%+ growth is back on the table in China.

The question is: Do you chase returns and try and time the market, or do your chose to diversify in the hope of getting a good return without all the risk? My preference is not to put all my eggs in one basket and to stay diversified with a tilt to those sectors that look promising. You should do your own research and get advice for your own personal circumstances, but, whatever you do, make your money work for you!

What are your thoughts? Once bitten, twice shy when it comes to equities? Happy with term deposits or property? Looking to enter the share market but just scared to do so while watching it rise and rise? Let me know your thoughts.

Have you ever had to deal with a Gen Y employee in your business? If you found yourself scratching your head with them, then you need to read this.

The timeline for Gen Y varies, but the term normally applies to those born between the 1980s and early 2000s. This is the first generation that saw their parents not have job security or any future income certainty.

Their predecessor, Gen X, had the benefit of seeing their parents hold just 1 or 2 jobs in their lifetime. Gen X parents would preach of job security like this: “get yourself a good safe bank job, government position or a trade”.

Well, Gen Y has not had that influence, and to them, employment security is not expected. Indeed, they expect—and seemingly look forward to—having many careers in their lifetime.

This causes a problem for employers, especially small businesses that invest a lot of time and effort ... Continue reading]]> Have you ever had to deal with a Gen Y employee in your business? If you found yourself scratching your head with them, then you need to read this.

The timeline for Gen Y varies, but the term normally applies to those born between the 1980s and early 2000s. This is the first generation that saw their parents not have job security or any future income certainty.

Their predecessor, Gen X, had the benefit of seeing their parents hold just 1 or 2 jobs in their lifetime. Gen X parents would preach of job security like this: “get yourself a good safe bank job, government position or a trade”.

Well, Gen Y has not had that influence, and to them, employment security is not expected. Indeed, they expect—and seemingly look forward to—having many careers in their lifetime.

This causes a problem for employers, especially small businesses that invest a lot of time and effort to train employees, only to see them jump ship at will for the next opportunity that rolls by.

So how do you keep Gen Y interested and engaged and avoid your employee turnover profile resembling a turnstile?

1.      Start with the right candidates for the job.

Gen Y applicants don’t see themselves as applicants and are just as likely to be interviewing you as you are them. Be honest about the work involved, training and earning potential, as well as what future advancement opportunities are available to them. Any other approach is a waste of time, as they will quickly exit if they feel bogged down and see no future.

2.      They soak up coaching.

Gen Ys have grown up in the internet generation where they could find lists of hints, tips, strategies and life stories on any subject at any time from experienced people, or “thought leaders”, around the world. So they actually love the idea of having a mentor or coach and will surprise you (and their mentor) by how much they use that service and develop that valuable relationship.

3.      Adapt your working conditions.

This is a generation that craves for life experiences and sees work as a way to pay for them. So a work/life balance is vital to Gen Y employees. You need to cater for longer weekends and “the grand tours”, and acknowledge their interests outside of work, and support their personal development.

4.      Show them a plan.

They need to feel they are contributing to something bigger, so put their position in context of the overall customer experience or product manufacturing process. You must be honest with them that with promotion comes more money, but that means longer hours and adjustments to their work/life balance.

5.      They don’t just want feedback, they need it.

An annual performance review is not enough for Gen Ys. They thrive on constant feedback and recognition from hands-on management. Gen Ys are most engaged when they feel their input is valued and respected, and in return, they will go through hoops for a good employer.

6.      Set clear career paths and goals.

Just because they don’t seek security or loyalty does not mean they don’t want to plan. Set realistic, benchmarked goals, and make it clear that achievement will equal promotion, success, and add to their future potential. What I have found is Gen Y love “projects”, as they are short-term and have a definite outcome, good or bad.

7.      Follow through on your promises.

The more you engage Gen Y properly, the greater trust and loyalty you will build with Gen Y. Don’t expect them to be there next month if you made promises based on their KPIs—which they achieve—and you then leave them hanging!

Theoretically, how much money you need in retirement depends on how long you live. Although there is no such crystal ball for this, we know that improved healthcare and economy has resulted in people living longer than their parents’ generation.

When budgeting for retirement, try to go for the maximum life expectancy. Men can expect to live up to 86, women to age 90. This means if you retire at 60, you need to fund your living expenses for at least 26 to 30 years, if not more. Also, look at your lifestyle and medical history as well as your family’s life expectancy and medical history.

It’s never too early to start thinking about how to maximise your income in retirement. By acting earlier, you have a better chance at achieving and funding the lifestyle you want.

The Theory

A common rule of thumb is that if you want to retire at 60, you ... Continue reading]]>

Theoretically, how much money you need in retirement depends on how long you live. Although there is no such crystal ball for this, we know that improved healthcare and economy has resulted in people living longer than their parents’ generation.

When budgeting for retirement, try to go for the maximum life expectancy. Men can expect to live up to 86, women to age 90. This means if you retire at 60, you need to fund your living expenses for at least 26 to 30 years, if not more. Also, look at your lifestyle and medical history as well as your family’s life expectancy and medical history.

It’s never too early to start thinking about how to maximise your income in retirement. By acting earlier, you have a better chance at achieving and funding the lifestyle you want.

The Theory

A common rule of thumb is that if you want to retire at 60, you will need about 15 times the amount you have calculated for your annual after-tax retirement expenses. So if you estimate $60,000 per year then you will need $900,000.

If you can wait until 65, you may only need 13 times expenses, which will be $780,000. Remember, if you plan to leave a legacy to your children or have a holiday home, then you need to add the cost to this estimate.

Another traditional way of working out how much you might need in retirement is to plump for 70 per cent of your net income in the last year before retirement (not too useful if you are 10-15 years away from that date).

This approximation, or guestimate, was a standard for many years. However, it may be too general, and you may be better served by having a more detailed understanding of your actual needs.

This is where a regular quarterly survey of current retirees comes in handy.

The Facts: Budgets for actual living expenses in retirement

The ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation, and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.

According to the latest data for September 2012, in general, a couple looking to achieve a comfortable retirement needs to spend $56,236 a year, while those seeking a ‘modest’ retirement lifestyle need to spend $32,511 a year.

Source:  ASFA Retirement Standard

The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a draw down on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

Spending too much in retirement?

Many people spend a lot more in the early years of retirement as they travel and enjoy the fruits of their labour. While this cash outflow may be scary initially, it tends to even itself out in later years.

I like to use the example of my dear Mother-In-Law, who is 92 and lives “on the smell of an oily rag”, enjoys her books and TV, her penchant for peaches and custard as her main luxury. The seniors’ healthcare card ensures that the cost of the drugs she uses don’t eat up her remaining savings. (Our refrigerator does look like a pharmacy.)

Whatever method you use to estimate the amount of money you need to achieve the lifestyle you want in retirement, it’s still important to remember that most of these work on the average life expectancy. If your family has a history of longevity or early death, then you need to make allowances accordingly.

The bottom line: It’s never too early to start planning, so if you want to see where you stand at present based on your current savings and contributions to super, then use the Retirement Calculator on the government’s free Money Smart site.

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Let me start by painting a typical scenario I faced recently. A couple wanted to buy an investment property. Their mortgage broker advised them that they were on the margin of getting the loan but needed to show more assets. He suggested they update the information and values of their numerous superannuation funds and to see me for help.

The clients decided they can do it themselves and save some money, which is fine by me, as I like clients to take ownership and be proactive. I pointed them in the way of www.unclaimedsuper.com.au and www.ato.gov.au/superseeker, which are two sites helpful in tracing lost super. I expected them to come to me with a list of the values and for advice on the next step.

Instead of researching and finding the current values, they took up the offer of a fund to consolidate all their accounts into one – on a no-advice ... Continue reading]]>  

Let me start by painting a typical scenario I faced recently. A couple wanted to buy an investment property. Their mortgage broker advised them that they were on the margin of getting the loan but needed to show more assets. He suggested they update the information and values of their numerous superannuation funds and to see me for help.

The clients decided they can do it themselves and save some money, which is fine by me, as I like clients to take ownership and be proactive. I pointed them in the way of www.unclaimedsuper.com.au and www.ato.gov.au/superseeker, which are two sites helpful in tracing lost super. I expected them to come to me with a list of the values and for advice on the next step.

Instead of researching and finding the current values, they took up the offer of a fund to consolidate all their accounts into one – on a no-advice basis of course! Just “a few simple forms” they were told. So, they completed the standard, government-provided “whole of balance transfer” forms, and the process got underway.

At this point, they came to see me about insurance. With the extra debt they are taking on, they would need a backup plan such as a life and income protection insurance in place.

So, I started collecting data for their insurance options. Now, the husband is fairly chubby like me, and the wife has ongoing medical treatment with her back after a fall from her mountain bike a few years ago.

Knowing that he would be heavily loaded for life cover and struggle to be accepted for income protection—and she would have a spinal exclusion at a minimum—I asked if they had any cover currently in their superannuation funds or standalone.

It was at this point she mentioned that the consolidation process had started. Upon checks with their old superannuation funds, I discovered he had $350,000 in life and total permanent disability (TPD) and $4300 per month salary continuance in his old employer fund. She had life and TPD cover in an industry fund. Both were consolidating to a different fund. Imagining losing all that!

In this instance we were very lucky. We were able to contact the funds with insurance in them and cancel the transfers, as they had not been finalised.

We then tried to get cover with the superannuation fund that they were consolidating to. But once the details of their conditions were disclosed, the insurers rejected them outright.

We eventually negotiated some restricted salary continuance cover for her with the expected spinal related injury exclusion. We agreed to maintain the funds with insurance already in place.

Although they were unable to cover the amount they needed, it was still a comfort for them to have a safety net to some degree rather than nothing.

The lesson I am trying to get across is that you must look at the full package when dealing with your superannuation, and consider all the benefits that are included rather than making a decision to consolidate on investment returns and fees alone.

Always assess your insurance needs, and if you need the cover, try and replace it in your chosen fund or elsewhere before consolidating your balances.

What’s that old saying? Act in haste and repent at leisure!

When should I hire a new employee?

This is a question that has plagued many small business owners as they plan for—and then experience—a growth phase. There is no easy answer, but in general, it’s better to be prepared than to scramble around looking for an extra hand when the workload increases.

Ideally, you would plan in advance and have a flexible, part-time employee from as early on as possible just to help with the administration. The idea is to train him or her to handle essential but non time-critical work.

The reduced workload should allow you to concentrate on building the business but should not break the bank. Consider offering flexible hours. We have found some great staff that can work a few days per week during school hours only.

Nowadays, you can often find very useful outsourcing services to perform some of the tasks until the workload builds to a ... Continue reading]]>

When should I hire a new employee?

This is a question that has plagued many small business owners as they plan for—and then experience—a growth phase. There is no easy answer, but in general, it’s better to be prepared than to scramble around looking for an extra hand when the workload increases.

Ideally, you would plan in advance and have a flexible, part-time employee from as early on as possible just to help with the administration. The idea is to train him or her to handle essential but non time-critical work.

The reduced workload should allow you to concentrate on building the business but should not break the bank. Consider offering flexible hours. We have found some great staff that can work a few days per week during school hours only.

Nowadays, you can often find very useful outsourcing services to perform some of the tasks until the workload builds to a point where you need someone in-house. Consider a virtual receptionist service that takes calls and messages when you are unavailable or a service to follow up on outstanding invoices, especially if you tend to leave the “dirty” jobs when faced with an overload.

One of the biggest mistakes—and I am guilty of this myself in the past—is leaving it too late and having to advertise, go over resumes, short-list, interview and then train a new member of staff when you are already in the middle of a business expansion phase.

You tend to panic and jump at the first candidate that seems right; often to find later that in your rush to fill the position, you did not do your homework and may regret the hasty decision. This is the period that can make or break your reputation. Taking your focus away from your clients or process at this stage can ruin all your hard work.

If you are really committed to building your business, then you need to treat this like insurance or a contingency plan for the business. Although it’s not totally necessary at this stage and may hurt your cash flow, it is often for the protection of your reputation.

If you do leave hiring to a time when you are very busy, then consider using the services of a recruitment agency to do the advertising and short listing of candidates. Did you know that Mission Australia Employment and similar agencies get government support to take your brief, search their database and short list candidates for you? These services are free to you.

They can often arrange additional training for the additional help to fill gaps in their skills. Their service is ideal for administration, hospitality and support staff, and we have found them excellent to deal with.

My point is this: the time to hire a new employee is BEFORE you really need him or her. It’s when the risk of not having a new employee is greater than the cost of bringing them on board.

Very much an American idea, the Board of Advisors is one powerful business tool that is starting to get a foothold here in Australia. If you bring together a good board of advisors, you’ll create a powerful asset that can make a huge difference in growing your business. The advisors are helpful for when you need objective advice, help with checking out your market and competitors, measuring future trends, seeking new strategic employees, getting introductions or building a loyal customer base.

This is not your board of directors; advisory boards are not responsible for the running of the business, and their advice is in the form of non-binding guidance. You may have some advisors who are more hands-on, meeting or teleconferencing monthly or more. Others you will meet with quarterly, with a holistic eye to the big picture. The members often have nothing to do with your business, but sometimes are ... Continue reading]]>

Very much an American idea, the Board of Advisors is one powerful business tool that is starting to get a foothold here in Australia. If you bring together a good board of advisors, you’ll create a powerful asset that can make a huge difference in growing your business. The advisors are helpful for when you need objective advice, help with checking out your market and competitors, measuring future trends, seeking new strategic employees, getting introductions or building a loyal customer base.

This is not your board of directors; advisory boards are not responsible for the running of the business, and their advice is in the form of non-binding guidance. You may have some advisors who are more hands-on, meeting or teleconferencing monthly or more. Others you will meet with quarterly, with a holistic eye to the big picture. The members often have nothing to do with your business, but sometimes are initial investors as well. What all such boards share is this: They guide, advise, evaluate against their own experiences and play devil’s advocate.  Here are some tips to follow when building an effective strategic advisory board:

1. Understand your goals and what your needs are from your Advisory Board. Are you in pre-start-up phase and needing specialist technical help, or are you established and looking to boost your reputation, gain acceptance in a new market, or access new sources of capital? Each scenario will determine the make-up of your board.
2. Choose people who match your needs and have relevant expertise and skill sets. Look for people who are passionate about what you do and believe in it. Make sure they have the time to commit to you, are problem solvers, have strong communications skills and are open-minded. Also, ensure they are well connected. Most importantly, you must enjoy each other’s company; that chemistry is essential, as you don’t want to fight for their time and attention.
3. Know what is in it for them. The best advisors love the association with success and are self-motivated when they are excited about a venture. Understand that from your success, they will have a long term association and recognition for their input. It’s never a one way street.
4. Set expectations and give them objectives. Who can they get you to meet; what specialist talent can they find for you; or can they introduce a new investor? Set regular catch up sessions in advance. The sessions can be by phone, Skype, or face-to-face.
5. Money is always tight, but you must compensate your board. Keep in mind that your board members will likely benefit themselves in a variety of ways. Don’t be shy about offering some equity for increased participation, but money is not everything. Being on your board will expose them to ideas and perspectives they may have otherwise missed. It will also expand their own networks and provide them with a way of giving back.
6. Respect their input, and don’t waste their time by having needless meetings with no prior preparation. They are looking in from the outside, so understand that you may be too close to the matter to be thinking logically, and their advice can drag you back to reality. But it is just advice, so always consider if it is the right move for you. Don’t get dragged down a path you are not comfortable with.
7. Keep them informed regularly. The fact that they’ve agreed to be on your board means they care about your company, so keeping them up-to-date will help them be of greater value to you. Remember that these people are out there looking for opportunities to promote your company.

In summary, know your needs, and search for the best people using sources like LinkedIn for specialists or chambers of commerce for local expertise. Start small, with one or two people as you have to commit time each month to meet, and work with them. I bet you will be surprised by how many people are looking to get involved and enjoy being a part of a successful venture.