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Chartered Accountants &
Business Advisors

Working with you to design a business you love so you can reach your definition of success.

Chartered Accountants &
Business Advisors

PHONEICONS-02+ 04 910 3340
WELLINGTON

PHONEICONS-02+ 04 910 3340
WELLINGTON

Why You Need to Work On Your Business – Not In It

13 Aug 2021 | Biz Strategy

Are you micro-managing every piece of your business? If so, you probably can’t see the forest for the trees – the bigger picture, instead of all the small details.

As the business owner or CEO, your job is to look ahead, imagine what your business can become, work out the business strategy, and make sure your team has the tools to bring your vision to fruition. In other words, working on your business.

Not only will the business be more successful when you work on your business, instead of in it. But you will enjoy it more as well.

The purpose of life is not to serve your business – your business’ purpose is to serve your life.

Is it time that you reimagine your business from being a burden that consumes your life, to the tool that will enable you to achieve the lifestyle you crave?

 

 

Signs that You’re Stuck on ‘In’

It may already be obvious to you where change is needed, but sometimes it’s a subtle and habitual approach that causes stagnation. If you’re caught in an employee-mindset, you often lose the entrepreneurial perspective that inspired you to be a business owner in the first place.

So, to help you identify whether you’re IN instead of ON, let’s look at some of the red flags:

  • There is no solid system of processes in place.
  • You don’t delegate enough, or ever, and are micro-managing every aspect of the business.
  • You’re constantly putting out fires.
  • You lack solid team members or department managers you can hand over responsibility to. 
  • You’re working long hours, are drained, and have little time for family, hobbies, or relaxation.
  • You’ve lost sight of your vision, creative inspiration, and goals.
  • You feel like an employee serving your business, not the business serving your life.

If you’re spending the majority of your time working in the trenches of your business, this leaves precious little time to actually focus on your business, with long-term planning, goal setting, performance tracking, or scaling. Although doable for the short-term, this approach will leave you with no energy or time for much else but managing day-to-day operations.

 

Why a Business Process System is Essential

As the business owner or CEO, your work is to design the machine-like structure of a business process system – the model of replicable actions and process automation that your team can follow.

The people on your team are vital to its success – they are on the frontline of your business. But, without the structure of solid business processes, the full potential of your employees will go to waste.

People bring systems to life. When systems work well, people have the space to, and often do, perform exceptionally.

“Businesses are not built by extraordinary people, but by ordinary people doing extraordinary things.” – Michael E. Gerber

 

Why Should You Design and Build a Well-Oiled Machine for Your Business?

These are some of the results you can expect:

  • Consistently providing superb services and value for your clients.
  • Cost efficiency, increased productivity, and higher employee satisfaction.
  • A structure for your team to know what to do when.
  • Easier transfer of business knowledge when someone leaves and you need to train a new staff member.
  • Structure and order which will empower you and the team, instead of chaos and confusion.

The only person in your company who will be genuinely motivated to grow your company is you. Every minute that you spend working on tasks that can be delegated is a minute that you are not planning, strategizing and building the best business possible. – Inc.com

 

How Do You Build a Well-Oiled Business Machine?

  • Take stock of everything and ask: “what can we do better?”, “where are our bottlenecks?”, “where do we not get consistent results?”, “what do we waste our time and resources on?”, and “what’s outdated?”.
  • Establish the big picture layout, and inspire an excited team effort of who’s going to do what, with clearly identified roles of responsibility.
  • Map out new procedures, fill in the blanks with the little details, and document the new processes. 
  • Test and tweak, gather feedback and adjust as required.
  • Train the team on new processes. Make sure more than one person knows how to do each task so there’s a backup for every role.
  • Establish an ongoing review and improvement plan.

 

Ready to Transition from Doing to Leading?

When the right people, structures, and processes are in place, not only will you improve the business’s agility and efficiency, you’ll finally have the freedom to step out of being a micro-manager. Instead, you’ll oversee the larger picture, lead your team, better react to change, and steer the ship in the direction that supports your vision for the business.

Need help building a process system so you can get out of IN and back to ON? Get in touch with us so we can help you to design your business to become the tool to achieve your dream.

The Art of Asking the Right Questions

29 Jul 2021 | Team

Your team is only as strong as the questions you ask 

If you’ve ever been in charge of training people, you may have had moments where you get frustrated with the pace people are learning at, or that you often have to repeat yourself. 

Maybe these thoughts sound familiar… 

“They don’t listen”

“I’ve told them that already”

“Why can’t they just do what they’re supposed to and stop interrupting me?” 

Have you ever thought that the problem doesn’t lie with those you’re trying to teach, but rather with your teaching method? Maybe you’re not telling them the right way. And by telling, we mean asking the right way.

 

Asking Your Team the Right Questions 

A big mistake we often make when we train new staff, is to just tell them what to do. Sure, if you don’t tell them what to do, how would they know how to do their job, right? And for the first few days, that’s exactly what you need to do. But there comes a time where you have to switch your approach from telling to asking. 

Let’s look at a few examples.

 

How do you understand your role/this process? 

You’d be surprised how often you may think someone is on the same page as you, while they’re actually in a completely different book. When you ask them to repeat the process back to you, you can easily spot the holes and correct them – and avoid unnecessary misunderstandings.

 

How do you think you should do this? 

This question is a great way to cement what you’ve taught them, especially if they’ve asked you the same question before. If you just repeat what you said previously, instead of asking them to explain it to you, you’re going to have to answer the same question a few more times. Talk about frustration overload! 

This is especially good for more technical questions. To give you a few examples of where we use this tactic at BWMD, is when we get questions like this: “I have a client query and I don’t know how to solve it”; “I’m not sure how to record this transaction”; or “How should I treat this for tax purposes?”

 

Why do you think we do it this way? 

This is a very powerful question to ask if you want the person to think a bit deeper and really understand what they’re doing. It’s also good for those instances where there isn’t a black and white answer. Not only will they grow in their knowledge and confidence, but they may also come up with ideas and solutions that you haven’t thought of before.

 

Getting into the Habit of Asking Questions 

Asking instead of telling doesn’t come naturally to everybody. It’s like a muscle you need to train, and the more you ask questions, the better you’ll get at it. 

You’ll also be pleasantly surprised when you see people learn quicker and retain what they’ve learned. They’ll also become better teachers themselves. Seeing how people grow is one of the most satisfying experiences any manager can have. 

So, next time someone asks you to explain something to you, answer their question with a question.

     

    Why You Don’t Need a 101-Point Plan of Action

    2 Jul 2021 | Biz Strategy, Vision

    When Sir William Wallace got onto his horse and gathered an army of everyday Scotts willing to bet everything – including their lives – on the vision he had, he did not waste time with a 101-point-plan-of-action. He inspired them with a simple message that caught fire immediately, and finally led to their victory.

     

    Your Vision 

    When you’re creating a vision for your business, ask yourself… 

    1. What does success look like to me?
    2. What do I/we want to become known for?
    3. Why do I believe so much in our solution?
    4. What is the transformation our ideal clients/buyers will go through when working with us/buying our product?
    5. How is our solution different from that of your competitors? 

    As every great army general (and entrepreneur) knows, a vision alone doesn’t guarantee victory. You have to have a proper strategy to get the right troops in the right positions, train them, make sure everybody has food and equipment, and so on.  

    Just like our famous red-haired Scot, you need both a great vision and a well-thought-out, actionable strategy to be successful. 

     

    Your Strategy 

    Many businesses don’t plan at all, while others get stuck in over-planning mode for ages. None of these approaches works. Instead, you should keep your plan simple enough for everybody to understand – and remember – but detailed enough to cover all risks and steps necessary to bring the vision to fruition.  

    Where do you get stuck when planning for your business? 

    • Do you find it challenging to create a vision and put it into words that inspire? 
    • Do you get stuck in planning mode?
    • Are you planning by the seat of your pants, constantly putting out fires as you go?
    • Or is it something entirely different?

    If you’re feeling stuck, not knowing how to turn your vision into reality, why not get in touch? We’ll help you to put the right pieces together to build a corona-proof business.

    Life Goal #3: Building a Legacy

    4 Jun 2021 | Legacy

    We’re taking you back to school with a fun little multiple choice question: 

    1. What is most important to you?
    • Keeping abreast with fads and trends
    • Building something of lasting value and impact

     For us, we’d choose to create a legacy every time. And we suspect you do too. 

    How that looks like for each of us may differ, though. For some, legacy may be the difference they make in their community, for others it’s to help their employees reach their goals and dreams. Others want to build a service or product that provides great value to their customers. And others want to change the way people think about things – for the better. 

    Having a vision of the legacy you want to create is only half the battle. You need a strategy to bring that vision into fruition and keep it alive for decades after you’ve hung up your hat. 

    Part of building a legacy is to have a succession plan in place. Not only will you keep the vision alive, but you’ll also provide financial security for yourself and your family. If you don’t, all the love, sweat and tears you’ve put into the business over the years may go to waste. It will stop when you stop being around.

     

    3 Elements of Succession Planning 

    There are three important elements to succession planning. We can help you to plan for and put all of these in place so that your legacy can keep going for years to come:

     

    1. Your Team 

    Your people are the most important part of the plan. They form the backbone of the business; they’re the ones that keep the wheels turning – even if your business is highly automated. 

    You want to retain your best employees and prepare them for their future roles, without your input. 

    Don’t just think about top management, though, think about all seats on the bus. Who are your rockstars the business can’t do without?  What about the salesperson who knows all your clients’ life stories and children by name? What about the electrician who fixes problems you don’t even know you have? 

    What happens if these rock stars aren’t around anymore? 

    When building your team… 

    • Identify the right people for future roles. The next person in line may not be the obvious choice. Look further. You may have some young employees with the right attributes that you can develop – both technical skills but also the attitude and willingness to grow.
    • Next, talk to them about their career goals. Do they see themselves in the roles you have in mind for them?
    • If you have any talent gaps, start hiring the right people.
    • Lastly, and most importantly, invest in the training and development of your team.

     

    2. Structures and Processes 

    Who is responsible for what? How do you do x and y? 

    Put structures in place and document procedures and templates so that everybody knows what they should do and how to do it. We call ours “This is the Way”. 

    Once you’ve developed that, make sure you test them and train people to follow the processes.

     

    3. The Money

    Ah, the money. Often neglected and forgotten. 

    Every change has a cost to it, and planning for succession is no different. You need a budget. 

    Here are some of the costs to consider: 

    • Hiring costs: If you don’t have the right talent in-house you need to hire, and rock stars don’t come cheap.
    • Overlapping salaries: You may need to employ a CEO to work with you for six months or a year before you leave to teach them the ropes. This is true for other key positions as well. Not only will this provide a sense of stability, but when you leave, your team are already comfortable interacting with the new person.
    • Salary increases: To retain your rock stars and superstars you may need to offer higher salaries. The new CEO may demand more than what you have been willing to take home.
    • Staff development: One of the most important aspects is developing leadership skills and training your team on technical skills. You may even need to hire a coach to help guide you and your employees through the transition period.
    • Bonuses and benefits: A change in leadership often causes staff turnover because of fear of the unknown. You may want to offer bonuses and benefits to your rockstars that the business can’t afford to lose.
    • Replacement costs: Despite putting all the above in place, you may still lose some people. Make sure you budget for replacement costs.
    • Your accountant and other advisors: You need people by your side – experts who have expertise and experiences that you don’t have. You need an outside perspective. You need a confidant, to listen to your challenges and help you to solve them.

     

    Ready to Build Your Legacy? 

    Putting a succession plan in place can feel overwhelming. Whether you need help with your budget, putting structures in place, helping you choose the best team, or being your sounding board for your ideas, we’d love to help. 

    Don’t try to go it alone.

     

    The Unexpected New Burden on Landlords

    30 Apr 2021 | Tax Updates

    On 23 March 2021, the government threw us a curveball no one saw coming. They proposed some major tax changes which they believe would fix the housing market and slow down house price increases.

    However, these changes will have a major impact on landlords.

    The proposed changes came out of the blue – not only did we not expect it, IRD and Treasury were surprised by the proposals as well. Because of this, there are a lot of details that are still unclear and we do not have definitive answers for you yet. 

    Although the details are still being worked out, here are some of the major changes proposed:

    • You will no longer be able to deduct interest you pay from residential rental income, however, it will be phased out over time.
    • The bright-line test will be extended from 5 to 10 years, except for new builds.
    • The main home exclusion will not apply to properties that weren’t used as the main home for the entire time, with some exceptions.

    Below is more information about these changes and how they would affect landlords.

     

    1. Phasing Out the Interest Deduction

    Currently, if you pay interest on a loan that relates to a residential investment property, you can deduct the interest from your income to reduce your taxable income.

    This will change from 1 October 2021.

    • For residential properties bought on or after 27 March 2021, no interest will be deductible from 1 October 2021. You will still be able to claim interest in the months leading up to October.
    • If you bought the property before 27 March 2021, interest will still be deducted, however, the amount you’ll be able to claim will decrease over the next 4 income years, until it’s completely phased out by the 2025-26 year.

    Below is a table showing how much interest you’ll be able to claim each year:

    There are certain exceptions to the rule:

    • If you have a business loan that is secured against the residential property, you will still be able to deduct the interest as a business expense.
    • Property developers will continue to be able to deduct interest from their income.

     

    2. Changes to the Bright-Line Test

    If you sell a residential property within a set period after you bought it, you will need to pay income tax on the profit you’ve made. This is called the bright-line test. The current period is 5 years for properties bought after 29 March 2018. The period has now been extended to 10 years for any residential buildings purchased after 27 March 2021.

    For instance, if you made a profit of $100,000 on the sale of a property, you bought it after 27 March 2021, and you sold it within 10 years, you will pay income tax on the $100,000.

    There are a few exceptions:

    • The period for new builds will continue to be 5 years.
    • If you inherited the property, it would still be exempt from the bright-line test.
    • If you used the property as your main home the entire time, it would be exempt from the bright-line test.

    If you didn’t use the property as your main home the entire time (apart from a 12-month grace period), then you will need to do an apportionment calculation. For instance, if you made a profit of $100,000 on the sale of the property, used it only 50% of the time as your main home, and you purchased it after 27 March 2021, you will need to pay tax on $50,000 (100,000 x 50%).

    Below is a nifty flow chart that explains when and how the bright-line test will be applied:

    Unintended Consequences?

    The government believes that these measures will slow house price increases and help first home buyers to enter the market. It may not go as planned, as previous tightening of the rules on landlords has increased the shortage of rentals.

    Landlords may decide to pass this burden on to the renter and increase rent prices to make up for the loss in interest deduction.

    Landlords may be forced to sell their property, which would reduce the supply of rental properties available which could cause further rental increases.

    Both these scenarios would hurt those the most who can’t afford to buy their own homes, which make up roughly 40% of the country’s population.

     

    Impact on Landlords

    As you can see, as a landlord your tax bill may increase significantly, depending on how much interest you pay on your mortgage. If you aren’t able to deduct interest from your rental income, which is often the largest portion of the deduction you’re able to make, your profit will be higher. This means the tax you pay on the profit will be higher as well.

    For instance, let’s say the interest you pay on your home loan is $20,000 every year.

    • In the 2023 year, you’d only be able to deduct 75% of that, so your profit would be more with $5,000 (20,000 x 25%). If you’re on the highest tax bracket of 39%, the additional tax you’ll pay is $1,950.
    • In the 2026 year, you won’t be able to deduct any interest. Your profit would be $20,000 higher, and the tax on that, if you’re on the 39% tax rate, would be $7,800.

    Before you make any rash decisions to sell your property or increase rental to the already over-burdened renters, hold on until we have more information. We’ll keep an eye on developments and keep you up to date as we learn more. Once we have a clearer picture of the new rules and regulations, come have a chat with us. Let us have a look at your business and investment structures and see if there are any changes you could make to these to lower your tax burden.