Setting up a new business is an incredibly exciting and challenging undertaking. Even for the serial entrepreneur, each new venture comes with unique tasks and trials. As much as each business and industry is different, certain aspects remain consistent across categories.
1. Start with the end goal in mind
Your best success in terms of the longevity of your business and generating personal wealth from it is to set up your business with a view to selling it within a set timeframe. While this may seem counterintuitive – you are, after all, investing your capital, time and energy into this enterprise – and you will likely have a strong emotional connection to your business, this does offer the best hope for success in terms of generating wealth and ensuring the success of your enterprise after you inevitably exit the business.
2. Growing pains are to be expected
Don’t be disheartened when, two years into operation, you are still struggling with cash flow and taking on any client you can get. This is the way it is done. Expect not to make any withdrawals from the business for the first two or three years and to reinvest all capital into growth drivers. The following three-year period is typically spent consolidating operations, fine tuning one’s product or service offering, and more clearly defining one’s target market and competitive advantage. Successfully navigating the stormy waters of these two phases should see you reaping the benefits in the third, which is not as predictable and consistently more profitable.
3. Keep a work-life balance
While establishing a business can seem like an all-consuming, never-ending task, it is important for your well-being – and the well-being of your business, in turn – to have a balanced professional and personal life. We all have to learn to prioritise between our career ambitions, goals and our lifestyle, which include important things like family, health, pleasure and spiritual development. There isn’t such a thing as a perfect and equally weighted work-life balance in the form of a formula that works for everyone. You’ll have to assess your own circumstances and apply the balance that works for you. In addition, find someone in a similar position to yourself who can relate to your experiences. It’ll help keep the challenges you will inevitably face in perspective.
4. Engage in estate and succession planning
You might want to consider setting up a trust for your business interests so that future growth of your business takes place in the trust while simultaneously lowering your personal tax liability and expenses. Trusts have many diverse applications and offer great flexibility when it comes to personal and corporate financial planning. Trusts provide effective separation between the trustees’ personal and business assets, and therefore offer great financial risk protection benefits.
It is important to note that once your business is sold or donated to a trust, the business then in fact belongs to the trust. You can still act as a trustee for your business trust and be a beneficiary too. However, a true separation of interests and voting rights needs to be demonstrated otherwise you expose yourself to various risks. Should you choose to run your business in your own name, a last will and testament becomes particularly important, as this will be used to determine what happens with your business upon your demise.
5. Don’t neglect tax planning
Bear in mind that you become liable for payment of income tax the moment your business makes a profit. There may, however, be tax allowances and special rates available to you, depending on your business entity type and the ownership structure of your business.
If your income exceeds or is likely to exceed R1 million in any consecutive 12 month period, then you will have to register your business for Value Added Tax (VAT). If you are a registered VAT vendor, it is of utmost importance to plan upfront with regards to your cash flow and set aside some money for the payment of VAT.
Entrepreneurship is viewed by many as the best kind of success: the ultimate testament to one’s skill and efforts. Invariably, this success is hard won. Elon Musk and Richard Branson make it look easy, but read their biographies. Many failures and years and struggle preceded their achievements.
Before launching your own venture, plan adequately upfront, expect to sow for a number of years before you reap, and maintain a balanced life. And remember Richard Branson’s words: “Business opportunities are like buses, there’s always another one coming.”
Seugnet Moggee is a Fiduciary Specialist at Citadel Wealth Management. She is a practicing attorney of the High Court. Her focus and passion lie in the areas of drafting tailor-made wills and trust deeds, estate planning and conducting trust legal audits.
Her passion is helping people to realise the importance of proper estate planning that secures a legacy for generations to come. Her hobbies include reading, writing and singing. She enjoys spending time with her husband and their mini Schnauzer.