Creating value in your business
Tim left a lucrative job in the IT industry to fulfil his dream of becoming a small business owner. Tim has been working long hours and has established a good reputation with his customers by providing a quality service.
Tim wanted to know if he was earning more now than when he was employed and the steps he needed to take to grow his business. To grow his business, Tim identified that he would need to employ specialist staff, purchase systems for quality assurance and job costing and would require funding for new equipment and working capital.
This OBT case study highlights how small business owners need to examine the return their business is generating and the steps required to create a business with easily identifiable value.
- Staying employed or become a business owner
- No plan for growth
- Finance needed to support growth
Resolved in 3 Easy Steps
1. Calculate Personal Earnings
Tim completed a comparison between the income his business is generating and his previous earnings in a full time job. This involved the following calculation:
- Business salary $80,000
- Business profit $150,000
- Total earnings from the business (p.a.) $230,000
- Total earnings per week (avge. 55hrs/week) $80/hr
- Previous contract hour rate $50/hr
- Net gain $30/hr
Tim was pleased.
2. Prepare a Business Plan
Tim agreed to complete a business plan to document his business growth objectives. Tim’s main planning objectives included creating systems to control his anticipated future growth, developing a plan for staff management with incentives and cash flow projections to secure bank funding support.
3. Finance and Insurance
Tim approached us to secure funding support. OBT was able to use the equity in Tim’s house to secure interest only funding support for the business. Tim’s adviser also updated his business insurance to include extra cover for the new debt and Tim’s increase in personal earnings.
OBT’s Business Life Planning Program was used to document Tim’s business growth objectives. Once completed, new insurance policies were purchased for life, key person, sickness and accident and trauma insurance. Tim’s bank provided a draw down facility for Tim to manage his budgeted working capital requirements.
For further information regarding the value of your business and how to optimise it, please download our factsheet Buying a job or building a successful business or contact OBT’s friendly team on 07 5462 2277.