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So you've got a great idea for your business, but you don't have the funds right now to get it off the ground.

You could try applying for a government grant, but it's often a long and arduous bureaucratic process of form filling and there are of course no guarantees you'll get the money. Some governments also offer tax incentives for research and development, but usually you need to spend the money before you can get it back.

And there are private investors-'business angels'-too, if you have the contacts and know how to structure and negotiate a good deal that you won't regret in the years to come.

'Bootstrapping' is the most common way that businesses fund their startup phase. This is where entrepreneurs fund the startup business out of their own savings and even from their credit card limits! High risk, but the bootstrapping advantage is that the founders don't have to give away equity or control to other investors. 

Read more…

6 Essential Financial Tips for Doctors

Financial Tips for DoctorsWe all have our fair share of challenges and doctors are no exception. While most doctors are really smart, medical intelligence does not necessarily translate to financial acumen. With a busy professional life, paying attention to financial matters is sometimes not given enough focus. If you are one of these medical practitioners trapped in the busy-ness of life, here are some essential financial tips to help set you up to be financially secure later in your life.

1. Make sure you have your own medical insurance. Just because you are a doctor, it doesn't mean you won't need health insurance. Before you can take good care of others, you need to ensure you take care of your most important asset, your health - the last thing you need is to be caught off guard by unforeseen illnesses. 

2. Avoid getting into the black hole of debt. If you have debt from medical school, credit cards or a mortgage, pay them off as early as possible. Paying interest for longer than necessary is like throwing away your hard earned money for nothing.

3. Save money as much as you can. Your future depends on what you do today. Consider setting up an automatic payment regularly into your savings account or retirement plan to start saving. As elderly people often say, saving and investing is not pure science but rather a habit that needs nurturing to build a solid foundation for the future. Read more…

New Zealand Shares IncreaseLed by A2 Milk Co, the New Zealand share market rose after $40 million was raised in a share placement. It jumped to 78 cents to aid the funding for the development of its infant formula products. According to the Grant Williamson, Director at Hamilton Hindin Greene, there are some disappointed investors who were not able to join or got scaled since the placement got away very easily.

The energy companies which include Contact Energy, Meridian Energy and Mighty River Power (MRP) advanced too. Williamson said that the demand for electricity generators has certainly come in again and he thought that investors are going to chase yields . Contact Energy rose by 1.3 percent while Meridian rose by 0.5 percent and MRP went higher by 0.4 percent.

Companies which are paying higher dividends but at a low interest rate make it more attractive and the yield stocks grow in the local trade.  Read more…

Research and Development by 2025The New Zealand government has a national science plan to take effect by the year 2025. This 10-year plan is about spending more on direct research grants for businesses. The target of this plan is to double private research and development spending over the next 10 years.

However feedback from the business community appears half-hearted on this type of spending as in general they would rather receive tax breaks.

The plan was launched at Royal Society of New Zealand in Wellington by Science and Innovation Minister Steven Joyce. Minister Joyce made a commitment at the launch to raise the government's spending on research and development (R&D) which is presently at 0.65 percent, to 0.8 percent of gross domestic product. This percentage is considered particularly low compared to other economies which are also small and advanced.  Read more…

We read a lot about the ageing population and its potential impact on the economy but what does it mean for small business?

In business, typically, it takes a lot of energy and planning to get started and a lot to keep going and keep growing. Very few business owners start a business with exit in mind. It seems completely counter-intuitive. You start with a dream and the tenacious passion to make it real and then you just want it to grow. But when do you start thinking realistically about what you want to happen when you retire?

Business for SaleFor some, it's too hard to think about. Many business owners might talk about funding a lifestyle but actually work has been their lifestyle. Straight up, they'd rather go with their boots on. But then what happens to the business? Economically it's a waste – a waste of the business' assets, client base, employees; it's a waste of the dream and the hard work it took to make it real.

What's your plan? What do you want to see happen? How much money do you need to retire? How do you start even thinking about all this?

In search of success(ors)

Are there family members working in the business who are interested in taking the business on? Do they have all the training and experience they need? What about your team or franchisees? Do any have management and leadership potential which could be developed further? It doesn't have to be a single individual – there might be a couple of key people motivated to form an effective partnership with some serious buying power. Is this a good time to start a conversation?

Alternatives to exit

If the idea of selling the business and retiring to a beautiful lifestyle bores you to snores, don't think about it in terms of complete cessation. If you find the right people, it might be feasible to keep an interest in the business and a slice of the decision-making. It could free you up sufficiently to discover more of the great lifestyle you could have had, if you'd ever had time to have a life. At the same time, you'll be able to share the rich business knowledge you've built up and you'll have the added satisfaction of seeing the business continue to grow.

Ready to sell

If selling is your best option, is your business 'sale ready'? To achieve the best possible price, you need your business to be in the best possible shape when it goes up for sale. You need to analyse your business from the point of view of a potential buyer. Is there clear documentation on business processes and performance? Is your business performing at peak? What would it take to be ready for sale and what is the most realistic timeframe to achieve it?

These are all things we can help with. At the very least, we can help you to start the conversation and work out a plan. Contact us today for more information or request an appointment online.


How do you know what to insure?

It's a bit of a Murphy's Law principle that businesses often don't really come to grips with their risk management plan (or the lack of one) till some random accident takes out a key manager or lead hand and it hits everyone what it will mean for the business.

No one can plan for everything but every business should have a sound grasp of the kinds of risks that might hit them hard. And every business should put strategies in place to minimise risk and deal with it, if the unthinkable happens.

Business InsuranceWhen you are thinking about insurable risk for your business, emotion can sometimes derail the process unless you put a framework in place to assist in the decision making process. You also need to assess whether you can manage risk through your own resources first.   

There is no one rule to apply to insurance risk as everyone's situation is different. However, start by brainstorming up every conceivable risk. Then divide your list into two columns:

  • What are the potentially catastrophic events that may affect your business?  What are the events that could result in financial loss, cause you to substantially change your lifestyle or force you to close down your business? These are ideal risks you should think about insuring for.
  • What are the risks that might potentially cause you to suffer losses but which you could manage out of your own resources such as cash assets? Generally, you may not need to insure against these risks.

Whenever they start to work through their insurance plan, most people tend to think about things rather than people - the buildings, the vehicles, plant and equipment. You also need to factor in the impact if key people were suddenly not there to make everything run smoothly.

Do a double take and consider whether you've really taken human capital risk into account. What would be the effect if you couldn't work for six months, for example? Who are the other key people in your business? What would be the impact if they couldn't work for six months or if they couldn't return to work at all?

Often people make the mistake of over or under insuring in the wrong area and find there are gaps in their risk management plan. For professional advice in structuring your risk management plan connect with your local insurance consultant. If you're not quite sure where to start, contact us first to help break it down.

Naming your business wisely

As a business owner, especially if your business is a new one, you will be eager and excited at the opportunities for growth, growth, growth – of course, everybody dreams of that. But before trying to decipher the pathways to success for your business, you need to first ask: who are you?

Your business' identity may actually rely on its very own best assets – good food, quality service, affordability for example – and all the positive adjectives found in the English language. But does the public really know you? Or worse, do they even remember who you are?

That's where a suitable business name becomes critical.

A good advertisement with a beautiful commercial model on the side may attract potential customers, but the name you give to your business will imply trust or distrust from your target market. A business logo may be changed from time to time to give the public a "fresh" perspective of you, but a business name usually remains for a very long time. So it is worth it to think about it carefully, just like a parent spending time thinking of a name before their baby is born.

Are there any rules in crafting a business name? Practically speaking there are none but you should be very careful.

Some people, like some parents naming their children, get the names of their businesses by combining their own names. This could be appropriate especially if your name carries a good reputation, but be cautious – it may in still wrong ideas in your customers on what your business is all about. If you establish a restaurant and you and your business partner's surnames are Rusty and Spoon, and you decide to combine them, the public might be scared to get tetanus and avoid coming in! Lost sales – and that hurts. Or if your surnames start with the letters S, C, A, and M, and you plan to combine them to name your insurance company… ah! Don't even consider it. Or if your surname is Schuzinderbalwoek and you plan to use it for a convenience store – don't. It will not be very convenient for the customer.

Another pitfall for some business owners is the idea of copying existing entities' names to ride on their popularity and sound catchy. Again don't. You might be selling cameras and name your business Koduck (with a matching duck logo carrying a DSLR camera). Or sell soft drinks and name your business Poke. Or establish a convenience store and name it Haven Eleven. Or… or… or… Please, just don't do it. Many business owners have already tried, and most times all it brings them is a bad reputation with a court summons as a bonus.

You do need to be creative – but not so much that the name sounds ridiculous or Harry Potter-y. It is better if your business name reflects what you really offer your customers. But don't make it so long to be worth forgetting. Don't rush, don't copy, don't overdo. Give your business a character through your business name. Make sure that it accurately describes what you do and/or what you want to become. Always remember that your name will imply trust or distrust from your target market so make sure it is worth remembering and strong enough to get the public stepping through your business' doors.

Buying a business in NZ? Chances are you'll be buying a Small to Medium Enterprise - a business with between 3 and 50 employees and a turnover of $250,000 to $10,000,000.

One of the most substantial risks facing SMEs is the loss of key people. A profitable, solvent business can quickly begin sinking if key human assets jump ship. Minimise your human capital risk at the outset by undertaking and implementing prudent risk management processes.

Things to consider:

1. Shareholder purchase and sell agreements.
  If you are buying a business with other investors make sure you seek legal advice on your shareholder agreements for the buy and sell of shares following major events such as death or serious incapacity.

2. Key person risk. As a new owner, you may not be the 'key person' on day one. Establish who has the expertise or business knowledge that is vital to your business' success as part of due diligence. Who does the business rely on? What is the current process for managing human capital risk?

3. Business debt.  Bank funding for the purchase of a business might require you to personally guarantee, offering your personal assets as security against a loan. You may also need to guarantee leases and supply agreements. Carefully consider what you are agreeing to.

4. Insurance factors.  Unfortunately, you can't buy insurance to protect against business failure from bad decisions or poor management but you can protect against serious events affecting key people that could cause the business to fail and you to default on your debt.

When purchasing a business it pays to implement a robust key person analysis process. This will enable you to understand how and why a business is vulnerable and the potential financial risks of not acting in advance, while enabling you to minimise risks and make informed decisions going forward.

Are you adequately covered?

As a business owner, have you considered what would happen if you became permanently sick or injured before retirement age? In this situation, adequate insurance cover is required to carry the business through a potentially difficult period.

A properly constructed insurance portfolio is vital for the stability of any small business. Of course there are numerous insurance policies available and, as various businesses are ore prone to particular risks than others, not all policies will be relevant to all businesses. We are happy to talk through the options with you.

Most businesses, however, should consider key-person and/or income protection insurance.

Key-person insurance provides funds to the business in the event of a key person dying or becoming totally or permanently disabled. It is taken out to cover income that will be lost until a replacement person is found and can also be used to cover any loans or commitments owing by the business.

Income protection insurance is insurance for the individual. Many different policies are available but in most cases a policy will pay up to 75% of a person's substantiated income through to retirement age or even until death in the event of sickness or accident.

Business owners should consider this:

- What would happen if you were unable to perform your normal duties?
- What would happen if you were run over by the "proverbial bus"?
- Who would take over the business?
- How would the bills be paid?
- Would the bank call up the loan?
- How would the principal's family survive?

These are important questions to consider ad others will be relevant to your particular situation. For example, if you are in partnership with other people, you need to consider the implications of one partner dying and surviving family members wanting to sell out. Appropriate policies are available for this type of business structure.

As with any insurance portfolio, you need to consider the risk involved to yourself, your family or your business and cover yourself accordingly. Permanent illness or injury or even sudden death may not be part of your business plan, but they can and do happen, and you or your family could be left seriously financially burdened unless you take prudent precautions. Key-person and income protection cover should definitely be considered as part of any small business insurance portfolio.

If you have already implemented a sound insurance portfolio, make sure you review it annually with us to ensure your cover continues to be relevant and adequate. You need to be mindful of any changes made to business operation and also take into account the current business climate.

Contact us for more information and assistance in this area.

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