Comparison of business structures

When you decide to establish a business it is first essential that you choose to operate within the appropriate business structure. Should you choose a company, discretionary trust (family trust), unit trust or a combination?

The answer will have a significant impact on the tax you pay and the protection of your assets.

For an overview of the two major structures watch this brief video by lawyer Brett Davies.

Also read the full article on LawCentral in issue 262 of their regular Bulletin (dated 4th May 2009). You will need to pay a small fee to become a platinum subscriber to read the full article. But that’s a small price to pay compared to the tax you could save from what you learn.

The must read book for aspiring entrepreneurs

Over half the people I speak to professionally list “self-employment” as one of their life goals. If you too dream of going out on your own or starting a business then I strongly recommend that you read “The E-myth Revisited” by Michal E. Gerber before you quit your job. Preferably you need to read The E-myth before you succumb to what Gerber calls ‘the Entrepreneurial Seizure’. Read my full review of this essential book.

Over half the people I speak to professionally list “self-employment” as one of their life goals. This can take many forms including:

  • Tradespeople wanting to go out on their own
  • Professionals wanting to start their own consulting business
  • Those wanting to start a business to pursue their passions (e.g. to open a restaurant)
  • And those who believe that owning their own business is the only way to get rich.

If you too dream of going out on your own or starting a business then I strongly recommend that you read “The E-myth Revisited” by Michal E. Gerber before you quit your job.

Or if you know someone who has the self-employment goal then please do them a huge friendly favour and forward this article to them now.

Preferably you need to read The E-myth before you succumb to what Gerber calls ‘the Entrepreneurial Seizure’. That’s the point where something inside your head resoundingly declares “I could do this for myself’, and from that point on your world is not the same.

The E-myth

The ‘E-myth’ is the myth of the entrepreneur. Gerber describes it best:

At the heart of the e-myth is ‘the fatal assumption’ that if you understand the technical work of a business, you understand a business that does that technical work. And the reason it is fatal is that it just isn’t true.

But the technician who starts a business fails to see this.

The real tragedy is that when the technician falls prey to the Fatal Assumption, the business that was supposed to free him form the limitations of working for somebody else actually enslaves him.

Self-employment enslaves many rather than frees them.

Now it’s not my intention to turn you off going into business. I do agree that many of the wealthiest people achieved their wealth by concentrating their risk and investing in their own business.

I want you to embark on that part of your journey with your eyes as wide open as possible to the realities of being in business. That is what Gerber does in “The E-myth”.

Inside The E-myth Revisited

The E-myth Revisited is written with a blend of traditional non-fiction text and parable. Gerber illustrates his points through the story of his client Sarah and her business “All About Pies.” This is a master stroke in getting the message across as Sarah experiences and expresses many of the emotions and questions that you do as you read the text.

If you’ve come across The E-myth after starting your business then you will likely relate to Sarah’s predicament. No matter how raw it feels stick with it as I promise you that the books also brings hope.

Part One of the book is essential reading for the aspiring self-employed person as you get an overview of the phases of business and some of the essential roles. One important distinction to grasp is the difference between:

  • The Entrepreneur
  • The Manager
  • The Technician

And to realise that everyone who goes into business is actually the three roles in one. But the trap is that you start by operating too much in the technician role and neglect the important functions of the other two roles. Yet without completing the function of all three roles the technician becomes stressed and enslaved as mentioned earlier.

After reading part one pause for reflection and take a good hard look at your situation and motives.

Are you truly willing to do what it will take to be successful?

Your Primary Aim

You may have heard of self-employed people that their business is their life. The truth is that a successful business is not your life, though it can play a significantly important role in your life.

You need to decide what role that will be by considering what Gerber refers to as your primary aim. To me this chapter of the book is gold. In one sense you really should start here. But without having read the earlier sections you may be too dismissive and flippant in your answers.

To discover your primary aim Gerber suggests you ask yourself these questions:

  • What do I value most?
  • What kind of life do I want?
  • What do I want my life to look like, to feel like?
  • Who do I wish to be?

Those who have worked closely with me may not be surprised that I consider this chapter to be gold as it mirrors my approach to financial planning. The whole purpose of a business and of creating wealth is to facilitate the life that you want. So first you must start by defining what is most important to you.

If having reflected on your primary aim you decide your business aspirations are for the right reasons then read further into the book to learn what a successful business needs to look like.

Your Turn-key Operation – The Franchise Prototype

One of the big ideas in “The E-myth” is that every business can aim to be turn-key and operate in a methodical, repeatable way like the successful franchises such as McDonalds. Whilst many entrepreneurs may not ever plan to franchise they can still operate their business as if it were the prototype for a franchise.

The pay-off for creating a turn-key operation includes:

  • Creating a real exit strategy. A well-run business that will continue to operate smoothly and profitably after sale is very attractive to buyers.
  • More time for you in the other roles in your life. Plus your time in the business will be more enjoyable.

Enjoying being in business and then easily selling it for a bucket load of cash seems to be the aim of most aspiring entrepreneurs. So resist the temptation to dismiss this section just because you can’t imagine yourself as a McDonalds.

The essential business eye opener

Self-employment and a business can be extremely rewarding both personally and financially. Sadly for most it is not. Businesses can burn through your hard earned assets and strain your relationships to breaking point. You can end up in a place you never wanted to be and don’t know how to get out of. (Ask Sarah.)

Even if owning your own business is just a speck on the horizon I strongly recommend you promptly buy and read “The E-myth Revisited” by Michal E. Gerber.

Identifying your passionate career

I am often asked by clients and seminar attendees how I changed careers and how I found my passion for financial education and planning. In this article I share some of my story and recommend two resources for identifying your passion.

This week marks the tenth anniversary of my career crisis. I am often asked by clients and seminar attendees how I changed careers and how I found my passion for financial education and planning.

My career crisis lasted much longer than I week. I had been getting progressively more miserable in my career as a petroleum engineer as I cycled through each placement on my graduate program with BHP Billiton Petroleum.

Then my 25th birthday arrived. This was a birthday that during high school had been one about which I had wondered what I would be doing. My life didn’t much resemble the high school fantasy.

My thoughts turned to one of the other future milestones – age 50 when I would have doubled my lifetime. I realised that I had worked with many people around that age who moaned about a lack of fulfillment and enjoyment in their jobs and careers. It suddenly dawned on me that if I continued my current path I would likely become one of those people at age 50.

Then I realised that if at age 50 I was one of those people and was still working in my first career as an engineer then my 50 year old self would want to go back and kick the butt of the 25 year old for not having the guts to do something about it.

That was my catalytic moment!

Finally I acted on the oft-repeated advice of my mentor at the time, Roger Dingle to read the book “What Colour Is Your Parachute?

The job hunter’s and career changer’s bible

What Color is Your Parachute?: A Practical Manual for Job-Hunters and Career-Changers: 2010What Colour Is Your Parachute?” by Richard Nelson Bolles is a fantastic resource. The first half you read and learn about some fantastic processes for identifying the job of your dreams. The second half of the book is systematic exercises that work through each element of a dream job including industry,  type of work, environment, responsibility, income, geographic location.

To complete the exercises you often start by thinking about what you have enjoyed in your life to date and methodically identify the characteristics that made it enjoyable. It takes time but the investment is worth it.

This is your fulfilling life we are talking about. Invest time now and you reap the rewards over your lifetime.

If you are pondering what career may be your passion then I strongly recommend you buy a copy of this book. Don’t borrow it from the library. Make the investment, write all through it and own the process.

If I had my time over I’d get help

Knowing what I know now I would go much further than the book. I should’ve also enlisted professional help with a career coach or counsellor.

But I was too tight! That ‘s the main reason I didn’t speak to a professional. I was young and didn’t yet appreciate the immense value of professional guidance. The biggest value is intangible but it is there in spades.

The value includes:

  • Enlightenment – discovering what I didn’t realise I needed to consider.
  • Clarity – filtering out the irrelevant and lasering in on what is applicable to my circumstance.
  • Direction – a road map of steps to do next and even resources to access.
  • Timeliness – discovering all of the above much sooner, quicker and easier than if explored on my own. Time is limited for all of us. I love it when others can accelerate my progress to greater success and fulfillment. That reward is immense.

It was tough but the rewards followed

I almost halved my salary when I changed jobs from working as engineer to a paraplanner. Plus I had the extra costs of funding my post-graduate study. Yes, that was hard.

But within two years I was promoted to a role with a salary package that exceed my former engineering package. And I was much happier.

You can do it too

I was able to handle the drop in income because I had been a reasonable saver and had planned ahead. You can do it to.

If you ponder a career change in your future life plan don’t let money be your hand brake. Start planning and saving now to have the financial resources to support you in pursuing your passion and a more fulfilling life.

Pursue your passions and wealth follows.


Discover my other recommended books here and read other book reviews here.

Make Money From Your Ideas

money from ideas in your head

My last article on Making Money Writing About Your Passion prompted this enquiry from regular reader, Nick:

“how can you generate an income stream from e-marketing and even sales of products of your expertise and knowledge”

You can make money from your expert ideas in your head – it’s called thought leadership. (I also recently wrote about Bernard Salt’s suggestion to become a thought leader.)

You make money from your thought leadership both online as Nick enquired and also the traditional offline methods such as speaking, mentoring and consulting.

One of the best thought leaders I know in the area of making money from your thought leadership is Matt Church. If you are interested in making money from the ideas in your head, as reader Nick is, then I strongly recommend you start by reading these two resources from Matt Church:

If you like what you read then I recommend you also join the Australian Thought Leaders Community. (WA readers who want to be thought leaders should contact me directly as I have some guest passes to our Perth based monthly member events.)

Making money writing about your passion

Ever since I was in high school I have striven to discover how to pursue my passions and make money doing so. Technological and social advances in the last decade have made this possible for us all with very little investment of money. You just start out investing your time, which is fine because you love spending time on your passions.

Today I came across two really useful articles about doing this.

Why Now is the time to Cash in on your Passion

Crush It!: Why Now is the Time to Cash in on Your PassionFirst I came across a review by BookRapper Geoff McDonald of the book “Crush It” by Gary Vaynerchuk. Crush It is about “Why Now is the time to Cash in on your Passion”. I’ve been a fan of Geoff’s BookRaps for a couple of years and this review of Crush It! is just as insightful.

I recommend watching the video of Gary Vaynerchuk in Geoff’s article. Vaynerchuk passionately expresses that you should pursue your passion and that you should be able to make money doing so. In the video Vaynerchuk talks about starting a blog about your passion. Then once you build a community of regular readers you can start to monetise the traffic.

How one Australian has made money blogging

Secondly I just read an article by professional Australian blogger, Neerav Bhatt in which he reveals how he makes lots of money from blogging. He makes enough that he quit his former salaried role, which is something almost all of my financial planning clients dream of doing. As Bhatt reveals he writes about his expertise, his experiences and his passions.

I’m sharing my passion with you right now

This site is me writing about my passion. I wasn’t always a financial planner – I started my working life as a petroleum engineer for BHP Billiton Petroleum. But all the time I was reading and learning about managing and making money.

When I eventually changed careers and started studying financial planning I constantly thought “why didn’t anyone tell me this about money and wealth creation?” I just had to tell everyone I knew. At the time my outlet was dinner parties. Now I write and speak.

I am passionate about sharing the simple, easy to understand things about money that have a high impact on your lifestyle but at also are low effort to implement. In that way I dream for us all to have enough money to pursue our passions. Plus you’ll have more time to pursue your passion because you’ll be spending less time managing and stressing about money.

What’s your passion? Time to start sharing it with people via a blog? You’ll discover other people as passionate as you living all over the world. For the next steps read the above resources.

Try to make your passion a business

Today, KPMG partner Bernard Salt is a well known commentator in the media as a perceived expert on demographics, especially in relation to its impact on property.

In his article in The Australian today Bernard Salt shares some of his lessons from his media journey, which started twenty years ago at the age of 32. It may seem glamorous but it has not always been easy and has taken “perseverance” in the face of well meaning advice from other “experts”.

 I strongly believing in identifying, pursuing and profiting from your passions so I recommend you read Salt’s article “Try to make your passion a business“.

(If the direct link has expired you can read the article here.)

Don’t Stress About Losing Your Job

Are you worried about how you will cope if your job is made redundant? Is this occupying your mind for too much of the day, taking some of the joy out of life or even worse, causing you to lose sleep?

If you have the three elements shared in this video in place then you can be confident you will survive the loss of your job.

 If you have gaps in the three elements then you need to act now to be prepared. If so, visit www.Redundancy-Advice.com.au for more detailed resources to plug the gaps.

Please share these insights with all of your friends and colleagues who are stressed about the possibility of losing their job. Help them get more joy in their life right now!

Redundancy First Aid

Worried about how you will cope if you lose your job? Follow the DR ABC of Redundancy First Aid to reduce your immediate stress and be confident you will survive. The advice is also great to keep in mind just in case you are one of the first on the scene when someone close to you is made redundant.

For more resources and redundancy advice visit www.Redundancy-Advice.com.au

Ensure your employer paid your super last month

In a presentation last Thursday night, Australian Taxation Office (ATO) second commissioner Jennie Granger said that of the 2,200 employers selected and visited since July 2008, around 1,045 had not met their superannuation guarantee obligations. (Reported here.)

With many small businesses struggling with cash flow at the moment it can be very tempting for them to not pay their compulsory superannuation contributions on time, if at all. There have been plenty of segments on current affairs shows of employees suddenly discovering they have not been paid superannuation for years. Then the business goes into liquidation and they never receive what they are owed.

This should not happen to you – unless you are ignoring your superannuation.

The compulsory 9% contribution must be paid at least quarterly. The deadline is the 28th day after the end of the last quarter. The last contribution was due on 28th January. So go online or call your superannuation fund and check your last contribution was paid. (Salary sacrifice amounts must be contributed in the same month they are sacrificed.)

If you are missing a contribution then confront your employer. Be as understanding as you like but just make sure you are informed about why it is late and precisely when it will be paid.

This could be one of your best indicators of the health of your employer and the likelihood of you losing your job.