Think about it now, not later

I rarely recommend that certain books are a "must" because different people have different taste, and I wouldn't presume to think that just because I like it everyone else will.  But the E-Myth by Michael Gerber is different because it revolutionised the way people think about business.  In my book (ah c'mon, it's been awhile since I threw in a bad pun), it actually is a must for business owners.

The crux of Gerber's E-Myth theory is that very few people are "born" entrepreneurs, instead what he suggests happens is that we have an entrepreneurial seizure.  One day we decide we don't want to work for anyone and we just have to be our own boss.

Naturally, most people that go into business are really good at what they do - so a good technician - but not necessarily good at running a business.

So then it's up to us to develop entrepreneurial skills to GROW our business.  Gerber was the one who coined the phrase that you need to work "ON" your business, not just "IN" it.

Now to truly be an entrepreneur and grow your business, it's critical that you "begin with the end in mind", which is a concept invented by another business brain, Steven Covey.  He said, and I love this, "If your ladder is not leaning against the right wall, every step you take gets you to the wrong place faster."

When we start out in business we expect to be in it for the long-term right?  We have goals.  Some of them loftier than others.  One important goal that's often neglected is how we want it to end.

If you're planning a trip you need to know where you're going before you can plan the route yeah?

In order to achieve any goal you need to set it, visualise it, and plan for it.  This includes ultimately exiting your business.

As business owners we take significant risks on board, in anticipation that we'll be duly rewarded in the future.  For most of us, we expect the prize to come in retirement (with some lifestyle rewards along the way of course), but it doesn't just magically happen.  We plan for it.

Do you want to sell your business for a profit?  Are you hoping to cease the physical work, but remain a shareholder with a regular income?  Will you simply wind down the business?  Do you want a family member or staff member to succeed you?

Starting with the end in mind helps you build not only the type of business you want, but also the business you need to reach your ultimate goals.  And that's what it's all about - achieving goals you've set for yourself and your family.

One of the most important roles of a Business Adviser is to help their clients achieve those goals, and this means regularly measuring how you're tracking towards them.

Note you'll often hear me harping on about how important it is to review your business and I think most business-owners realise this and even agree with it (even if they don't always do it), but not a lot of business owners think about valuing their business to determine how they're tracking towards their goals.  In fact, most business owners don't consider doing this unless they're about to sell.

If you missed Michael Moschetti's article "Why value your business?" in our latest "4 Ways Bulletin" click here because it may give you some interesting food for thought.

If you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Business" radio segment on 98.1FM Radio Eastern.

Talk soon,
Caren

Gearing explained in plain English

I have a client who is a really smart guy.  He has a list of qualifications as long as your arm (not my arm coz that would be pretty short) and he's one of the best in his field.  But when I told him that gearing involved borrowing he was positively stunned.  No one had ever told him that before.

What's the point of telling you this story?  Simply that gearing isn't necessarily a straightforward investment concept and if it's a subject you find confusing - well, you're in good company!

We've prepared a simple fact sheet that explains all the important points about gearing in plain English! Click here to read it, and if it's something you'd like to explore further, just give us a call.

By the way, my client told me I should tell as many people as possible his story in the spirit of financial eduction.

Talk soon,

Caren

PS. Please don't keep me a secret.  If you know someone who'd enjoy this or find it useful, pass it on!

How to write "right" in business

As business owners, we also need to be reasonably competent “writers”.

It’s always been important, but in this new age of the internet and social media, we’ve kinda been foisted into the world of publishing whether we like it or not.

And let’s be honest – most business owners don’t like it!

I’m lucky because I have had training in writing, and have a degree in literature BUT as I’m about to explain, even that doesn’t mean I get it right all of the time.

Click here to find out how I got it so wrong, and how you can get it so right! (write… love a pun…)

Talk soon,
Caren

How to find out what your customers want (what they really, really want...)

I own a business, work full-time, and there are currently 10 people living in my home.  Now I'm not complaining, I wouldn't have it any other way, BUT I definitely don't need any unnecessary stress or complications.  For this reason I like to keep things simple wherever possible.

One of the things I believe makes me unique as a business adviser is I don't feel the need to make myself look clever with overly complex business concepts.  If I have the answer, I'll give it to you straight.

So can I answer the question about what your clients or customers really want?  Absolutely!  And it's so simple that of course you already know it, but a reminder never hurts...

The answer?

Drumroll please.....

"Ask them".

Your customers/clients are the only people that truly know what they want from you and your business.  More importantly, you should be looking at your customer base and determining the ones you really enjoy doing business with - your target market - and actively finding out what it is that they value, or would value if you offered it to them.

SO HOW???

Online or paper surveys are a quick and inexpensive way to get feedback from your customers/clients. Just be aware that surveys of this nature generally only receive a response rate of around 20%-30%.

A far more effective feedback forum is a Focus Group or Client Advisory Board.  This involves getting a cross-section of your existing customers together and discussing how your business could be even better.  It's incredibly powerful, because it lets you know:

• What your customers and clients feel and think about your business and what you do.
•  What your customers and clients really want from your business (rather than what we, as owners think they want!) and how to improve it from your customer's point of view.
• What you need to do to significantly improve your business.
• The 'hot buttons' to use in your sales and marketing to make it easy for potential customers to spot the differences (like why you're better!) between you and your competitors.
• How to increase the results you get from the marketing dollars you spend.

Click here to find out how to hold a Focus Group, how to get your customers to attend, and the results you can expect.  And by the way - I'm an awesome facilitator if you need one :)

Of course, if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Business" radio segment on 98.1FM Radio Eastern.

Talk soon,

Caren  

To claim the home office or not to claim the home office; that is the question.

Let's get one thing straight - I'm not an Accountant.  I do not own, nor will I ever own, a brown cardigan!  Oh actually I just realised that's a lie - I do remember owning a brown cardy once - but brown was waaaaay cooler in the 70s...

I'm a Financial Planner who is completely surrounded by tax experts - my partner, my father, my brother, my uncle, even my 19 year old step-daughter is at Uni studying tax!  So I do get asked a lot of tax questions, especially at this time of the year.

One of the most common (not to mention the most commonly misunderstood) is what's deductible when it comes to the home office.  And it's important to understand that from the tax office's perspective there's a significant difference between "working from home" and "working from a home office".  So first you need to....

Hang on!  I just mentioned I'm surrounded by tax experts, so why should I do the hard work?

Click here for a short and easy to read ePaper written by Dean Hendrie (the brother tax expert), outlining what qualifies as a "home office" and what deductions you can claim.

Of course, if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Business" radio segment on 98.1FM Radio Eastern.

Talk soon,

Caren

How can your business compete against 7,000 other marketing images per day?

If you’re a business owner, then I don’t need to tell you that there’s a lot of competition out there. It can be hard to get your message across when there are soooooo many other messages in your space alone.

I attended a webinar recently where the speaker advised us that we’re exposed to a whopping 7,000+ marketing and sales images every single day – and you’re trying to compete against that!!!

So what’s the answer? You must be unique! Actually, it’s more than that. You can’t just be unique, you have to be able to articulate and promote your uniqueness.

Essentially, you need to give your target market a compelling reason to buy from you rather than someone else. It’s these differences that make one business, product, or service more attractive than another in the customers’ eyes.

So how do you develop a Unique Service Proposition? Well there are three main types:

1. An 'Actual' Unique Service Proposition. That is, there's something genuinely unique about your business, the products, or services you provide or the way in which you provide these products and services.

Creating your Unique Service Proposition will revolve around expressing that actual uniqueness in a way that's meaningful to your potential customers and clients. This is often easier to do if you sell a product rather than a service.

2. The second is a 'Created' Unique Service Proposition. That is, you create a point of differentiation between your business and your competitors.

You may have heard me talk about "Paddy the Dentist." It's one of my favourite (true!) stories. Paddy openly acknowledged that there were a lot of other good dental practices in the area, so he knew he had to make his practice unique if he wanted to do really well. He interviewed his clients to find out what they hated most about going to the dentist. Turns out the overwhelming majority claimed it was the waiting room - the smell, the noise, the anticipation of pain.

So Paddy turned his waiting room into a tea salon! When you arrived at his surgery there was classical music being piped through the waiting room, you were shown to a comfortable seat and handed a menu to choose from a selection of over 50 tea varieties. It was served to you from a pot in a fine china cup and saucer. The experience was indulgent and relaxing. Can you guess the result for Paddy’s business? Phenomenal! Paddy had created a difference that certainly gave customers a compelling reason to go to him, stay with him, and refer him to others.

3. The third kind of Unique Service Proposition, the ‘Perceived Service Proposition,’ is also critically important - your Unique Services Proposition does not (in fact) have to be unique.

You may not have anything in your business that’s totally unique. But if you’re the first one to articulate a difference (even though others do the same), you’ll stand out in the marketplace as if you are unique.Simply because you’ve been the first to articulate it.

I mentioned earlier that not only do you need to offer something unique, but you need to articulate it. It sounds obvious, but most businesses have never articulated those differences. They expect people to buy from them simply because they’re in the marketplace. Most simply say ‘buy from us.’ But they don’t give the potential customer a clear and compelling reason why they should do so. 

Those things that make you unique, must permeate your entire business: the way your team members present themselves, the way you deal with your customers or clients, the way your business itself is presented, all your marketing material, even your signage, if possible.

I hope this has started the creative juices flowing, and that you’ll take some time to work out the key point of differentiation between you and your competitors to help the customers identify that they really do need to choose you over anyone else. 

For a detailed fact sheet on developing your Unique Service Proposition (including lots of examples), just click here

And if you’d like to hear more of what I have to say on the matter, click here for a recording of my most recent “You & Your Business” radio segment on 98.1FM Radio Eastern (or ask me about a one-on-one session to help identify a Unique Service Proposition for your business).

Talk soon,

Caren

The success you can achieve when your personal & business goals are in alignment

The most successful businesses are run by people who love what they do. This is great, but of course there’s real danger that your business can become all-consuming when you love what you do.

Your personal goals (family, lifestyle, community, spiritual) need to be in harmony with your business goals. When they’re not, tensions develop, breakdowns occur, and achieving any of your long-term objectives becomes almost impossible.

And it’s a lot more involved than simply striking a “work-home” balance. It’s about ensuring your fundamental values and purpose are aligned for both yourself and your business. This involves:

   ∙  Planning

   ∙  decision making;

   ∙  careful execution;

   ∙  asset protection;

   ∙  regular review; and

   ∙  a clear picture of the “ultimate” reward you expect from

      your business.

 

I guess I understand this because Michael (Moschetti) and I live and breathe it. As partners at home as well as the office, we realised a long time ago that we could only achieve true success by reconciling our business aspirations with what we wanted from life personally.

Because it’s so important, we recently wrote an e-Paper together called “Business – it’s Personal”. In this paper, we share our story, as well as give practical tips and strategies for you to implement in your own business including:

   ∙  How to align your personal and business goals

      (a step by step guide);

   ∙  How to protect against obstacles and risks that may

      prevent you from reaching your goals; and

   ∙  The steps you must take now, to achieve the financial

      and personal rewards you’re working towards.

To read "Business - it's Personal", just click here - we’ve tried to keep it as entertaining and jargon-free as possible.

You may also like to click here to listen to a recording of my most recent “You and Your Business” segment were I talk about this topic on Radio Eastern 98.1FM.

Talk soon,

Caren

Women and Super

Last Friday was International Women’s Day, so I thought it was appropriate to reference something I read in the Herald Sun from 6 March (there was no one in the lunch room to “quiz me” so I had to actually read the paper…). According to the article, a recent Canstar research report claims that stay-at-home mums miss out on $160,000 - $290,000 in superannuation savings.

Yikes, that’s a lot of money!

I’m definitely not suggesting that women who choose to stay at home with their children should now rush back to work to improve their super balance, but it does mean that somewhere along the lines you may need to address the “hole” and make sensible financial decisions to get back on track.

But what is “on track”?

Last week I mentioned that a typical rule of thumb is that you’ll probably need about 60%-80% of the annual income you earned before retirement to maintain a similar standard of living.

And if you like your statistics, the Association of Super Funds Australia (ASFA) release national figures each quarter benchmarking what most Australians need to spend to achieve a modest or a comfortable retirement.

According to the latest the ASFA Retirement Standard figures, a couple looking to achieve a comfortable retirement needs to spend $56,339 a year, while those seeking a ‘modest’ retirement lifestyle need to spend $32,555 a year. The figures for a single person are $22,585 and $41,186 respectively.

Of course, everyone’s different, but these figures can be a helpful guideline when you’re working out whether you’re likely to have a “super hole” (yep, double entendre deliberate) to fill in retirement - male or female!

Click here if you’d like to read a copy of the Herald Sun article, and click here for full details of the ASFA Retirement Standard including assumptions and their definitions of modest and comfortable.

Talk soon,

C

Some perspective around the “fiscal cliff”

Dad and I often laugh about some of the “extreme” terms that are coined by the media. One of our favourites is “fiscal cliff”, I mean blimey, how scary does that sound?! For me that term conjures up an image of Barrack Obama hanging one-handed from the edge of a cliff with Republican Treasurer, Tony Parker, prying at his fingers.

Don’t get me wrong, the situation in the US is serious, but as always, we need to keep perspective.

With all the doom and gloom, there’s also been a lot of good news coming out of the States and so I feel a little bit of balance is called for… Below are some good news stories that you could have been excused for missing amongst all the negative noise.

• Whilst there’s been a lot of media coverage on the fact that that the US economy contracted slightly in the December quarter, it would seem this is mostly related to disruptions caused by Hurricane Sandy and a drop in defence spending. So far nothing concrete to indicate they’re heading back into recession. 
• The pace of growth in private final demand actually picked up from 2% in the September quarter to 3% in the December quarter, and basically what this means is that underlying growth is fine, which is a positive sign.
• US corporates are in a financially very strong position with approximately $1.7 trillion dollars in cash sitting offshore. More than 70% of listed US companies reported greater than forecasted earnings expectations last quarter and 65% reported greater than forecasted revenue expectations.
• Business investment is looking stronger, construction spending is on the rise, consumer sentiment is up and jobs growth has been fair.
• The Republican Party (who control the House of Representatives) have agreed to cooperate with Obama’s recent debt ceiling proposal, albeit with conditions, which is a positive step. As I mentioned on my radio program last year, I couldn’t ever imagine the Republican Party would want to be seen as the reason the US went back into recession and for this reason would ultimately always agree to raising the debt ceiling. However, last year that they left their cooperation until the 11th hour and the argey bargey caused some real confidence damage. And if I can just hark back to last week’s blog post, you’ll recall the impact investor confidence has on sharemarket performance in the current climate.
• Obama has proposed a “sequester” on automatic budget cuts and tax increases which would have otherwise come into play this year, and this should hopefully have a positive effect on confidence and economic recovery.
• The International Monetarty Fund (IMF) have conceded that some of their fiscal austerity measures have been harsher than necessary, and will take a more moderate approach going forward.
• The US banking system may not be completely “fixed” but is greatly improved, and definitely well ahead of Europe.
• The US has access now to abundant cheap energy in the form of gas, and by 2017 is set to overtake Saudi Arabia and Russia to become the largest single producer of oil in the world.
• The US housing crisis appeared to bottom late last year, and US households are reducing debt at around US $500bn per annum.

Without question, the US still have a massive task ahead to fully recover from the financial mess they got themselves into - a task made even more difficult by the political instability of a Government with no clear majority.

It’s easy to get caught up in the negativity because frankly that’s what’s thrust upon us every day, but at the end of the day, the question we really want answered is – how does this effect us? And you can only get this answer and perspective with a balanced view of what’s going on. Hopefully I’ve helped provide a little bit of that today.

Hard not to be bitter…

It’s pretty easy to blame the US for the Global Financial Crisis (GFC). Even if they weren’t completely to blame, their housing slump and sub-prime debacle were a mighty big contribution.
You remember right? All those sub-prime mortgages where banks would loan money to just about anyone, and not only that but some were non-recourse (ie. if the bank forecloses and doesn’t get the full value of the property, there’s no further requirement for the homeowner to pay the balance of their loan). I’m no Julia Childs, but I see a really good recipe there – for disaster! Maybe something like this:

Mix way too many sub-prime mortgages with an over-supply of housing in some areas, and make a well in the middle. Gently fold in rising unemployment and a generous splash of foreclosures due to interest rate hikes. Pour into a tin lined with a collapse in residential housing. Bake at 180 degrees Celsius and test with a skewer and if gross domestic product (GDP) is falling it’s ready. Cool for (let’s face it, about 4 years) and what you have is a perfect GFC yeah?

So it’s a little hard not to be bitter watching their sharemarket screaming towards its highest point in history. In October 2007 the Dow Jones index reached it’s all time high of 14,164 and as I write, it’s at 13,125.

Of course that’s good, I’m not really whinging about their success BUT, in the words of Moving Pictures (or Shannon Noll if you didn’t get to experience the 80s), “What about me?”

In good old Oz, our ASX All Ordinaries index reached 6,854 points in November 2007, and where are we now? 4,348 as of yesterday. Still a long way off our all time high! Seems a tad unfair?

So what should we expect from sharemarkets going forward?

Prior to 2007, business cycles were reasonably long in duration, but it would seem now that they have shortened (eg. 3-5 years) in response to world monetary difficulties (probably euphemistic for some of the European countries). And of course there’s political and religious unrest, not to mention government instability in various geographic regions. So this relatively shorter business cycle began in mid-2009, and economists are forecasting that it possibly has another 12-18 months to run.

Anyone who listens to my radio program will have heard me say that “volatility is the new black”. It’s here to stay for at least this cycle. I did some research a couple of months ago and at that particular time our sharemarket had experienced movement of more than 1% in a single day 97 times in the 12 month period. WOW!! (By the way that’s an expression of amazement, not the Woolworths ASX code). Fortunately most of those times were “upward.”

Sooooooo, market volatility will continue for some time and we’re concerned that government stimulation packages haven’t been enough to sufficiently boost flailing economies. Depending upon a number of factors (eg. presidential and congress elections in the US next year, a programmed change to the political leadership in China, a continued thrust to hold the European Union together) there’s the possibility of a world recession in late 2012 – 2013. So my recommendation is to make sure you protect on the downside by taking a more tactical approach to portfolio management. For example, the current circumstances would seem to call for some strategic defensive positioning. In particular, holding enough equity exposure to take advantage of any market rallies over the next 6-12 months, but also putting measures in place to help protect against “downside” risk.

Alright, well that’s as technical as I’m prepared to get, it must be time for some cheese and bikkies (yes that’s my excuse for a glass of wine).

Talk soon.
C

A reminder about what “simplified tax returns” actually means.

I know I covered this last year following the 2010 Federal Budget, but I thought it was worth re-visiting as it’s a topic that seems to have caused some confusion.

You may recall at the time, Wayne Swan tried to promote the proposal by saying it will give most people “more time with their loved ones.” Talk about a stretch!! Methinks he needs a tad more spin doctor training.

The idea is that from 1 July 2012, individual taxpayers will have the option of claiming a standard deduction of $500 for work related expenses and the cost of managing their tax affairs. From 1 July 2013, the Government will increase this standard deduction to $1,000.

This is supposed to make it easier to lodge your own tax return, and in some instances this will be the case. The standard deduction is optional, you can still claim your full “actual” expenses if you believe they will be higher.

An important statistic to take into account that the government is not promoting is that the ATO have released figures showing that the actual average deductions claimed is more than $2,800.

So it begs the question - do you trust the government with your tax deductions? And please bear in mind they are talking about $1,000 of deductions, not a $1,000 refund. At the 30% marginal tax rate the ATO’s actual average taxpayer will be doing themselves out of almost $600 refund.

By making it simpler, are they really hoping that we’ll get lazy and forego our higher tax refund for the easier option? After all, it’s the government trying to save themselves money through reduced administration. Call me cynical, but I just don’t see the government introducing this policy to make my life easier, there has to be more in it for them.

Talk soon,
C

FEEL THE NOISE?

Oh man, it has been a noisy few weeks in sharemarket land. And most of that noise has been coming from the media – bless their often misguided, sometimes completely irresponsible, cotton socks.

This will be a fairly lengthy blog, but I think (hope) well worthwhile for anyone that’s wondering what on earth is going on. More importantly, it will provide some perspective.

But most importantly, there’s a prize offer at the end!!!!!

At my business, The Hendrie Group, our approach to managing finances has always been to identify long term goals and then to develop strategic plans to help meet those objectives.

As with all plans, nothing is set in stone, and there may well be variations along the way, to respond to changes both in your goals and to investment markets.

But we try to keep those changes to a minimum, by having a long term strategy, and filtering out the market “noise” which fills the media on an almost daily basis.

Those of you who regularly read my blog or listen to my radio program (98.1FM Radio Eastern Thursdays after the 9am news), will be accustomed to my periodic harangues about the need to be wary of sensationalism in media headlines and reporting. Not to mention, inaccurate reporting, media focus on “short termism” particularly in relation to investment returns, over-emphasis on the issue of fees, etc, etc ….. and to remain focused on the long term.

So, given the market gyrations of recent weeks, and the associated reports, I was pleased to read two articles which – in differing ways - reflected my philosophy.

In a topical article titled Why the fear industry has moved on from the Greek ‘crisis’ well-known and respected Australian finance journalist Michael Pascoe wrote:

“Is anyone feeling a little sheepish after all the hype about the potential Greek Armageddon last week? Probably not. The fear and worry industry immediately moved on to beating up the importance of China’s manufacturing industry numbers on Friday.

For all the theatre of protesters and police, the whiff of tear-gas in reporters’ constant pieces to camera, the repeated lines about the danger of Greece causing another global financial crisis….nothing much really happened.

…….Meanwhile, back at the headline factory, China’s indicator of manufacturing activity, the purchasing managers index (PMI) came in lower than expected for June. The Australian stock market allegedly saw that as a bad thing, indicating that China is slowing, albeit to a growth of about 9%. The Shanghai market saw it as a good thing, indicating that China is slowing and therefore Beijing won’t have to increase interest rates again. So it goes.”

(Market Perspective, The Sunday Age, July 3 2011, p22)

Jim Stackpool, a leading management consultant to financial planning businesses, says:

“Good financial professionals deliver certainty in a constantly uncertain world. Mining booms will come and go, international markets will fluctuate, countries - and companies the size of continents - will not perform predictably, natural and unnatural disasters will occur, and unforeseen threats will raise their ugly heads. The ramifications of each of these events will affect the assurance people seek, and good financial professionals anticipate this.

… (they) also understand our ‘natural financial wiring’… adversely affects most peoples’ decision making (that is most of us mere mortals tend to buy high and sell low), and they know how this thinking will most significantly affect the attainment of greater financial certainty in our lives.

Even more importantly, they understand their clients well enough to deliver the wealth management services required to reinforce and lead their clients on the financial journey most appropriate to deliver the assurance each and every client seeks.”

(Asset Financial Review, July 2011, p40-41)

(Note: All the bolding is mine for emphasis).
And finally, eminent Australian economist Shane Oliver (so not the media) wrote in his latest issue of Oliver’s Insights:

“A massive increase in economic and financial information flow is adding to investor jitters and driving a shift further away from long term-investing. This is likely to work against investors over time.

Investors should consider turning down the ‘news volume’ and refocus on investing for the long term, remembering the best time to invest is when everyone is gloomy. Averaging into weakness is a good way to go.”

(Oliver’s Insights, Edition 18, 29 June 2011)

So my message remains the same - stick with your long term strategy. Unless you really can’t stand the strain, in which case talk through your issues with your adviser.

Ok, now to the prize offer. If you have a Facebook account all you need to do to enter our draw is “like” our new Hendrie Group page before 31 July. The prize is a 26" Full HD LED Kogan TV with built-in DVD player and PVR. How good is that?

Talk soon,

C