Our overriding philosophy at Achieve Business & Financial Solutions Pty Ltd is to help our clients improve business performance and position thereby achieving financial independence.
Achieve Business Solutions are the accountants Frankston business owners trust. We believe there are 10 key factors to achieving business success and financial independence:
One: Have 5 and 10-year goals
We’ve all heard countless times that we should have goals and plans.
Having a goal gives you something to shoot for – It’s hard to score points if there are no goalposts.
The goals should be measurable and achievable. They should also be reviewed and updated.
Two: Accumulate quality assets
There is a lot to be learned from the game “Monopoly”. The lessons include:
- Buy assets when you can
- Improve or upgrade the assets when you can, and
- The winner is the one with the most/best assets
Strategy comes to play here.
Sometimes you need to hold back your resources in the event that a better asset becomes available.
Three: Maximise and manage “good” debt
Quite simply, we believe that everyone should maximise the amount of debt they have, subject to four rules:
- Quality – the debt must be for quality, growth assets.
- Equity – you must have sufficient equity in your assets. This will be needed for banks to use as security. Do not borrow too much.
- Cashflow – there must be enough income, from all sources, to cover all your interest, repayments, operating, living and other outgoing requirements
- Risk – the level of debt must be within your comfortable risk range. If it is keeping you awake at night, it is too much.
Four: Recognise the difference between business and investment assets
This section is also about not putting “all your eggs in the one omelette”.
Too often we see a client continue to put all of their resources into their business assets. They forget to diversify.
It is important to spread the risk and diversify your income stream and risk profile.
Five: Have the correct legal structures
Having the legal structures that suit your situation can assist with:
- Income tax planning
- Planning for capital gains tax
- Asset protection – litigation
- Asset protection – marital breakdown
- Asset protection – spendthrift family members
- Succession planning – allowing for the transition of assets to the next generation with reduced tax and other government costs.
- Succession planning – allowing other people to buy into the business or pay you out.
Six: Protect your assets
There is no point working hard to accumulate assets if you are not going to protect them.
Protection includes having the correct insurance in place. You need to consider general and personal insurance:
- General – property insurance
- General – public risk
- General – professional indemnity
- General – products insurance
- Personal – life (death) and TPD (total & personal disability)
- Personal – trauma
- Personal – sickness, accident, income protection
Protection also includes having strategies in place to cover the range of down events that can happen. What if your General Manager becomes sick?
What if there is a large flood?
What if the market collapses?
What if you have a stroke?
You need to think about what would be done in these and other circumstances.
Seven: Have a long-term strategic plan (succession plan)
The word “succession” has become the “word thou shall not say”. The dislike of this word, and the connotations associated with it, has made the issue much harder to deal with.
We’ve found it helps to think of the issue as long-term strategic planning. Have a long-term plan to cover the growth of the business or family assets and include some details as to who is going to be responsible for the assets over time. By default, you will have a succession plan.
Work towards “succession by growth” than succession by inheritance. Help the next generation as early as possible.
The fastest way for the older generation to be financially independent is by helping the next generation become financially independent.
The pen is mightier than the sword. One of the biggest barriers to financial independence is a lack of financial education. Schools and universities do not teach financial literacy. This is up to you.
Do a course on shares. Go to a residential property seminar. Read management, motivation and wealth creation books. Have business and investment discussions with your family and friends. At the dinner table. Regularly.
Nine: Review and renew
Regularly review your current financial position. Measure and track your performance. Review your strategies and renew your goals.
Your overall plan is a dynamic, living document. You may note that I’ve called it a document. That is, you should write your plan down. Don’t simply keep it in your head. Having it written down can assist with holding yourself accountable.
Despite previously held beliefs it does not need to be a paperweight. It can be condensed to one page, albeit an A3 page.
Ten: Seek professional advice
You should get professional advice for the areas that you do not have the skills in. A common trait of our successful clients is that they willingly get professional advice when needed. The value of good advice vastly outweighs the cost.
Do yourself a favour, and resolve to start or review your plan to achieve financial independence.