Even though most businesses want everyone to be their customer, this is not necessarily the right approach to making a profit. Instead, it is often best to think small in order to get big. To maximise your sales and profits, businesses should start narrowing their market to get a niche.
Focusing in on a small sub-set of all potential customers seems dangerous. Why limit the pool of customers when it might already be small? But having a well-defined, narrow target market – a niche – gives a small business many advantages.
Choosing a niche means finding something that immediately distinguishes you from your competitors. Having a niche immediately sets you apart from the mass of competitors; gives you a clear focus for your marketing and advertising efforts; gives you additional credibility when you’re trying to make a sale; makes you more memorable and often enables you to charge higher prices.
So how do you choose a niche? Keep in mind that a niche must be based on objective factors – things that customers can quickly perceive. Consider the following:
Selecting a specific demographic group gives you an edge in attracting a certain segment of customers. They feel welcome doing business with you. Over time, you develop specialised knowledge of that market, giving you an even greater competitive advantage.
Type of work
Another way to select a niche is to focus in on a specific aspect of the work you do. Focusing in on what your business does gives focus to your marketing efforts and can even make owners more competitive in securing customers.
Choosing a specific style of service or product is another way to develop a niche. A restaurant could serve only organic food, a furniture store sell only all-wood furniture, a car wash only wash cars by hand. These styles all narrow your potential market but improve your competitiveness with the customers who value your style of business.
Since employee morale can quickly build or hinder a business’s success, business owners increasingly need to focus on keeping employees motivated and engaged.
As low morale is often the cause of increased turnover and low productivity it pays to be proactive when it comes to managing employee satisfaction. Here are some strategies to improve employee morale and productivity in your workplace:
Recognising and rewarding your employees for their accomplishments demonstrates your appreciation for their work. Rather than singling out people for good work, try rewarding everyone for the achievements of a few to reinforce teamwork. Celebrate your business successes with your team; employees who feel like the successes of the business are their successes also are more inclined to work hard and come up with ideas of their own.
Focus on career development
Employees are more likely to have higher job satisfaction if they know that you are invested in their career goals and provide opportunities for career advancement. Identify your employees individual career goals and commit to investing in them. Whether it is as simple as teaming them up with co-worker to learn a new skill or providing work time to study online make it happen. The end result will often lead to happy and more productive workers and a more skilled team for you.
Encourage social activities
Socialising with colleagues can form a major part of whether someone like or dislikes their job. Implementing social activities such as team building exercises, supporting a charity or setting up a social club for outside activities can go a long way to improving employee engagement.
An investment strategy is fundamental when it comes to self-managed super funds. Not only is having one a statutory requirement, but it also helps SMSF trustees know what to invest in to meet the fund’s investment goal.
Above all, an SMSF investment strategy must be designed to help trustees reach their retirement goal.
To do this, the strategy must outline the fund’s objectives. Every fund’s objective will be different and should reflect the circumstances of each fund member. For example, it must take into account the age and when each member plans to retire, existing assets inside and outside of super, each member’s current and future salary and ability to contribute to the fund. Importantly, it must also factor the ability of the fund’s assets to be sold within a specific time frame.
Taking into account the risk profile of each fund member will help the strategy determine what the fund invests in. In cases where the risk profile of each member differs, individual asset pools should be created to reflect individual members’ risk preferences.
SMSF strategies need to be reviewed regularly, especially during important life events, like when a member enters retirement, suffers from an illness, goes through a divorce or passes away. These events can have a substantial effect on how a fund operates e.g. if a member dies, a fund’s asset allocation may need to change so that the fund holds fewer high-risk assets.
While there is no such thing as a ‘one size fits all approach’ when it comes to an SMSF’s investment strategy, it is essential for a strategy to consider the elements such as the ones discussed to ensure the fund complies with regulations and meets member needs in retirement.
A quick scan of the average taxpayer’s wallet of receipts or documents in the home office can result in quite a few expenses they can claim as tax deductions. However, some of the most obvious get forgotten on a regular basis.
While not all available tax deductions will apply for every individual (since claimable items vary based on the work they do and other personal circumstances), there are some frequently-used items professionals say people often overlook.
iPhones and iPads
Those who use their iPhone or iPad for work and have to pay for it may be able to claim a tax deduction for work-related data usage or calls. If their employer pays for their phone calls but they have purchased a cover for the phone or iPad to protect it, they may be able to claim that.
Electricity, internet and rent
Those who have a small business can claim a portion of their electricity bill, internet bill and even rent. Individuals can also claim depreciation on new computers, phones and printers up to the value of $300. However, these tax deductions do not apply to people who work from home one day a week.
Those who drive to see clients as part of their job can save on tax in that area. The two methods used to claim a deduction are cents per kilometre, where individuals can claim 66 cents per kilometre travelled, or through a log book. Individuals must keep receipts for petrol, insurance, registration, servicing and lease costs for the whole year.
Those who have done a self-education course in the past year to improve their job skills can claim a tax deduction. However, if the reason a person does the course is because they’re sick of their current job and want to get a new one, they cannot claim a deduction.
Those who keep their receipts from donating to a registered charity can claim it as a tax deduction.
Staying on top of your records all year round can save time, prevent unnecessary stress and help maximise a small business’s tax return. Although record-keeping can seem like a monotonous job, it is an essential part of running a business. Good recordkeeping makes it easier to meet your tax obligations, manage cash flow and make sound business decisions.
Here are some business records you need to keep:
Expense or purchase records: You must keep records of all business expenses such as receipts, invoices including tax invoices, cheque book receipts, credit card vouchers and diaries to record small cash expenses.
Year-end records: These records include lists of creditors or debtors and worksheets to calculate depreciating assets, stocktake sheets and capital gains tax records.
Income and sales records: You must keep records of all sale transactions such as invoices including tax invoices, receipt books, cash register tapes and records of cash sales.
Bank records: Documents such as bank statements, loan documents and bank deposit books need to be kept in preparation for your tax return.
Income tax records: Records must be kept of all your sales (income) and expenses to prepare your business activity statement (BAS) and annual income tax return.
Before trying out new super strategies to cope with the proposed super changes announced in the May federal budget, it is worth noting that the budget announcements are proposals and have not been enshrined in law yet.
However, if the Coalition returns to power after the July 2 election, then it’s quite probable the budget announcements will be written into Australian law.
With this is mind, here are some things you potentially could do to maximise your situation.
Consider how much you’ve put into super as concessional contributions
A person earning $100,000 can save $8000 in tax if they salary sacrifice $20,000 a year. Until June 30 next year, if you’re over 50, your maximum contribution is $35,000 a year, and if you’re 50 years of age, it’s $30,000. From July 2017, that cap will be lowered to $25,000 for everyone.
Set up a transition to retirement income stream (TTRS)
TTRS should be set up this financial year to maximise the benefits such as a no capital gains tax and no earnings tax. Taxpayers may also benefit next financial year before the proposed introduction of earnings tax at 15 per cent and capital gains at 10 or 15 per cent depending on how long an asset is held in a fund.
Use the re-contribution strategy
Those with more than $1.6 million in their super may also benefit from using the re-contribution strategy. It could be used to withdraw money from one person’s account and re-contributed to the other’s to keep both balances below the cap.
Use the spouse contribution
Where a person earns under $37,000, their spouse can make a $3000 non-concessional super contribution, which will provide the contributor with a rebate of $540.
Leave super in accumulation mode
With the age pension assets test being lowered from $1,170,000 to an estimated $825,000 in January, couples can benefit from leaving the younger partner’s super in accumulation mode until he/she attains age pension age because their super won’t be counted towards the assets test.
The Australian Tax Office has its sight set on an emerging tax avoidance tactic being taken up by a number of self-managed superannuation funds.
The ATO has warned trustees not to use a strategy known as personal services income (PSI) through their SMSF to pay little or no tax. Even though only a handful of cases are currently being investigated, the Tax Office believes the strategy could become more widespread.
Consultants and contractors often receive a personal services income (PSI) which is paid via a trust, partnership or company for legitimate tax advantages. PSI is common in professions such as finance, IT, engineering, construction and medicine, as it is distinct from salary income paid by an employer.
The ATO had become aware of instances where PSI was placed into an SMSF so that the income was taxed at a concessional rate rather than full marginal rates.
The Tax Office has released a statement that seeks to make it clear that individuals who are avoiding paying income tax by directing their earnings into their self-managed superannuation fund are breaching the law.
Those that are found to be promoting these or similar arrangements will leave themselves open to the possibility of penalty under the promoter penalty laws.
The ATO has issued guidance for SMSFs about related-party loans and dividend stripping, where a private company channels franked dividends into an SMSF, instead of the company’s original shareholders, to escape tax.
One of the top considerations new business owners face when preparing where to operate is location. Location is one of the most critical decisions as it can determine whether customers will enter your store or shop with your competitors.
There are many factors to consider when determining location such as demographics, visibility, supply chain, competition, budget and legal and environmental obligations. Here are some tips to help you decide on the right business location:
Determine what your business requires
Understanding the key demographics of your target market can provide insight into where your customers live and prefer to shop. As most businesses will choose a location that provides exposure to customers, it is worth considering visibility and accessibility when deciding on a location. Other considerations include:
Competition: Are neighbouring businesses competing or complementary?
Future growth: Do you plan to expand or grow in the future? Will you have extra space if needed?
Image: Is the area consistent with your brand image?
Forecast your finances
When determining how much you can afford, it is a good idea to forecast any additional financial costs you may incur such as:
Transportation: What will be the cost of moving business equipment?
Redecoration: Will the location need any improvements such as repainting?
Tax: What are the income, sales and property tax rates for your state? Could you pay less taxes by operating across a nearby state line?
Research the area
The business premises and its surroundings will have a large impact on whether your customers will travel to your location. Study the foot and vehicle traffic for the area to ensure the location is practical for your customers. Some questions to consider include:
Parking: Is there a parking lot for the shopfront? Is there affordable public or street parking nearby?
Public transport: Is it convenient to access with public transport?
Commercial activity: Are there similar businesses nearby? Is the area run down or a thriving shopping precinct? Does your business create noise or smells that may affect neighbouring stores?
Changes announced in the 2016 Federal Budget will see the shutdown or conversion of tens of thousands of transition to retirement pensions (TTRPs) into full pensions.
An estimated 550,000 TTRPs are currently in place around Australia, used mainly by taxpayers in their late 50s and early 60s who are reducing their work hours, or by low-income earners who are trying to boost their super balances before retirement.
However, many are also used as a tax minimisation strategy by high income earners, as they enable workers over the age of 55 to access their super while still working.
To do this, individuals must salary sacrifice a portion of their income to a tax-free transition pension, which allows them to continue contributing to their super while paying 15 per cent super contributions tax. To supplement their take-home pay, individuals draw income from their TTRP account.
High income earners who don’t need extra cash withdraw money from their pension and pump it straight back in.
Under the Budget’s new rules, earnings generated by transition retirement pensions will be taxed at 15 per cent, rather than being tax-free.
High income earners who transfer money withdrawn from their TTRP directly back into superannuation will now be subject to a $500,000 lifetime limit on after-tax contributions.
The changes mean that TTRPs would only be useful for those who require extra cash while they reduce working hour numbers of for those who can make larger contributions to super than they might otherwise.
Tougher superannuation rules may create an unintended spike in risky property borrowing by those with a self-managed super fund, with experts suggesting that the changes will force SMSFs to load up on debt in an attempt to increase returns.
While there are still incentives for people to wanting to own property within their SMSF, under the new rules announced in the 2016 Federal Budget, rather than being able to fund investments through their own equity, many SMSFs will be forced to take on more debt to do so.
Most of the superannuation changes are due to take effect from 1 July 2017. They include a $1.6 million limit on the amount that can be transferred from a super accumulation account into a retirement account and a new lifetime limit on non-concessional (after-tax) contributions of $500,000, backdated to 2007, which took effect on budget night.
In most cases, super funds are not allowed to borrow. The exception is the limited recourse borrowing arrangement, which is only allowed in Australia’s SMSF sector.
Since 2013, the Reserve Bank of Australia has expressed concerns over the number of SMSFs taking on debt to invest in property. More recently, the ATO has cracked down on SMSFs that don’t qualify for bank finance turning to related-party loans to buy property.