Sole Survival Is In The System
Sydney Morning Herald
Saturday August 9, 2008
Julianne Dowling writes on how to be prepared for life's curly times
When bad stuff happens, what happens to the business? The fashion designer Charlie Brown's tumour and more recently the relationship blow-up of her fellow designer Wayne Cooper have arguably placed incredible pressure on their high-profile brands. "I think these sort of events are more painful if you're high profile," said Robert Gerrish, a business coach and the co-author of Flying Solo, "because it impacts upon your brand. I'm talking to someone who runs her own business, and her life is upside-down - more so because everything pivots around a solo flyer. "Take that person out of the picture and it's all gone. If the commodity for sale is your time, then you're in trouble." Thankfully, business owners can fall back on some safeguards for dark scenarios, using a mix of delegation, insurance and systems. Rob Dalton, a partner at the strategic growth markets practice at Ernst & Young, has seen many entrepreneurs use a coach to learn how to delegate, so that their business can survive for a time without them. "The business isn't that person and maybe they need help to discover the critical drivers and who are the people related to these," Mr Dalton said. "So if the answer is that it's 'just me who knows everything', then you need to introduce team members and delegate." That could mean ensuring your accounts payable clerk knows a little more about cash flow management (and can talk to your accountant), and the buyer needs to know your customers and can keep the contracts going. Many operators think such systems are for others, but not for them, Mr Gerrish said."But procedures can be liberating, such as handling email, backing-up information and debtor management. So write them down and then delegate. And experiment with holidays. When you go away, don't take the palm pilot and see what happens. "Get more automatic ways to respond rather than being totally available." If you run a micro-business, consider a virtual assistant on a temporary account while you are on leave so you don't have to deal with 200 unanswered emails. "Make the website work hard, so have handling procedures on the site, too," Mr Gerrish said.Other suggestions are to look at further areas to outsource, such as accounts, because as long as there is only one key person, there is a significant risk. Ensure all the company contacts are in one place, so that someone else can pick up the work flow if you are not around. And keep computer passwords with a trusted adviser.Use your alliances better. The idea that only three out of 10 businesses survive was false, Mr Gerrish said, but many owners gave up because they became burnt out and running the business became too hard. Sometimes simplifying and letting go of the business may be the best option. "If you're sick and not around, then you should have recommended alternatives for customers to stay happy. It's better to refer than leave people in the lurch. It can work well if you're a service provider and solo, too. In a service-based business, we tend to think that it's bad to fall ill or not be there all the time. So, maybe renegotiate or talk openly about the projects and arrangements."We shouldn't be afraid to speak up about these things. If you need to take a break, then flag it." David Haintz, the managing director of Haintz Financial Services, agreed that when a business owner got sick or had an emotional crisis, the effect on personal and business wealth could not be overstated. "It's a matter of keeping an eye on the ball but there's no choice really. You simply have to soldier on."With illness, you should brainstorm all the "what ifs" and then decide what you need to implement, he said. "If you face chronic illness, you must have risk and life insurance - or you may choose to self-insure. If your assets are strong enough then maybe you don't need to take on a premium. But if you do, the advice is to get a tax-deductible premium and the right structure on the pay-out, which may be through life insurance through super."You can live past your expectancy, you can die prematurely or suffer some form of sickness or accident that prevents working for some time - we would build cash flow scenarios to work out what you need to cover. These are the starting points." Good advice from accountants and financial planners put you in a better position, Mr Haintz said.A common situation in divorce, apart from the valuation of a business, was the issue of whether to unravel a self-managed super fund, where both spouses are members and may be directors or trustees, he said. First, you need to know who is remaining and who is withdrawing. "If the wife exits, then the trust deed will have to change to individual trustees - which may be the husband and a family member and an accountant. There will be only one member but two individual trustees, which may include a corporate trustee. You can have a sole director. "From a death perspective, the key concern is about partnership agreements. If there are no partners, then provide insurance to keep it going for whoever inherits the business so there will be a cash injection. If there are two or more shareholders then there should be appropriate insurances, too. If the key person died, then they should be appropriately insured."Only a small portion of businesses sought advice on this; accountants tended to recommended agreements, but maybe not insurance, Mr Haintz said. When we get sick or divorced, it can feel like the worst thing in the world. "We have to accept it," Mr Gerrish said. "And be prepared to let go, too. Maybe your new ideas for the business will just have to wait a while. "Emotions can be more intangible and mess with your head for a long time. So there are other remedies that could be taken. "Getting space and taking time out is really important rather than just throwing yourself more into work." "But the bigger issue will be whether the problems came about because you were always working."
© 2008 Sydney Morning Herald