Crystal ball gazing – keeping the future front of mind

It’s really important to ensure that you have the right processes in place. Suelen McCallum explains how to avoid the pitfalls of doing business.

As often happens, ideas for newsletters and blogs come when you least expect them.  I had a meeting with a new client recently, one with a very messy and sad story of deception and fraud. 

To some extent it was a pretty common tale of going into business on a handshake and assuming that everything would be okay because mates don’t do the wrong thing by each other, do they? 

Anyway, it got me thinking about all the pitfalls of going into business and they just kept coming!  Here’s a few to start (and not the obvious ones that should be covered by warranties or due diligence).
 

1. Put it in writing – document your shareholder agreements, your management agreements and your employment agreements.  Record all minutes of directors and shareholders meetings, but more importantly make sure you actually have those meetings if you have important issues to discuss!  It doesn’t matter how well you all get along at the start of the venture – people and events change over time and not always for the better.


2. Look at the long term as well as the short – you might be tempted to lowball the values of the business when you buy into it or start it up in order to gain some tax or stamp duty advantages.  However, this might come back to bite you in the long term when you sell the business and have a monster capital gains tax issue to deal with!


3. Get the structure right now – make sure your business and corporate structures maximise asset protection and minimise risk.  Much better to have that cost now and get the structure in place for future growth, than bear the pain and cost that goes with trying to unravel a mess in a few years’ time.


4. Don’t trust your gut instinct – you might have a good head for business, but only believe in what you can measure and test.  Otherwise, how do you manage it?


5. Get your checks and balances right – put systems and procedures into place that will help potential problems to be flagged.  Make sure you have visibility on the important things – for example tax lodgements, creditors etc – don’t just take someone’s word that they have been paid or dealt with.

It’s often so easy to push back on what may or may not happen in the future, because you have enough on your plate to deal with, just on current issues.  But if you don’t polish off that crystal ball and put some protection strategies into place, those issues might just come back to haunt you. 

Suelen McCallum is the CEO of dVT Consulting a member of the de Vries Tayeh group. dVT Consulting specialises in corporate strategy and turnaround management, particularly in the SME sectors, as well as due diligence, litigation support and business succession.