Page 7 - How To Avoid Going Bust In Business

If you don’t have the technical skill to do a capital needs projection get someone to
do it for you.

With a chart of the financial needs in the future you must make a clear and creditable
plan to meet those demands. It’s not good enough to use the McCawber philosophy
“Something will turn up”.

Financing your enterprise is beyond the scope of this book, but if you don’t have a
well drafted financing plan you could be needing the all advice this book offers.

6: Splurging the profits

You have started your business and it’s booming. You’ve taken on three staff to help
you cope.

As Elvis said “The money just keeps on pourin’ in”.

You buy that $70,000 ute you have been drooling over. Then there’s the power
boat. And a new car for She Who Must Be Listened To, as well as the house
renovations.

There’s a luxury cruise or a trip overseas to that dream destination. Going biz class
of course and nothing less than five star accom.

After all why not? You’ve worked for it. Damned hard worked for it.

But comes the day a few months into your second year in business when you are
sitting with your accountant and she says “I’ll need a cash transfer of $65,000”.

Eh? What for?

“Income tax. You have had a very good year, especially for a first year in business.”

“But I don’t have that kind of cash on hand,” you say.

Then she hits you with the killer punch. “I will also shortly need a payment of $18,000
for the first instalment of provisional tax for this year”.

For far too many business this is the drop of the financial guillotine.

Much depends, of course, on the tax jurisdiction you are working in, but worldwide,
taxation officials are flinty eyed when it comes to getting their share of the spoils.

Except, apparently, in Greece where it seems paying tax is optional. Or so a local
tour guide told me recently.

Caution: Don’t start blowing the dough until you have been at least three years in
business and have a battle-ready balance sheet. The business environment may not