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Provision Newsletter

Wanted: Post-retirement advice for SMSFs

Posted On:Jul 31st, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

Self-managed super funds (SMSFs) have increasing unmet needs for advice about having a regular retirement income, investing in retirement and estate planning.

The 2019 Vanguard/Investment Trends SMSF Report estimates that 145,000 SMSFs have unmet needs for advice on post-retirement planning while 80,000 SMSFs have unmet needs for estate-planning advice.

This equates to almost a quarter of SMSFs having unmet needs for post-retirement advice –

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Self-managed super funds (SMSFs) have increasing unmet needs for advice about having a regular retirement income, investing in retirement and estate planning.

The 2019 Vanguard/Investment Trends SMSF Report estimates that 145,000 SMSFs have unmet needs for advice on post-retirement planning while 80,000 SMSFs have unmet needs for estate-planning advice.

This equates to almost a quarter of SMSFs having unmet needs for post-retirement advice – based on the number of funds in existence at the time at the time of surveys by specialist researcher Investment Trends. And 13 per cent of SMSFs have unmet needs for estate-planning advice. These percentages would be higher among funds with older members.

Further, the research found that 11 per cent of SMSF trustees had concerns about the ability of other members to manage their super funds following their death or serious illness.

The recognition by so many SMSF trustees that they need professional guidance with their post-retirement and estate planning is driven by an array of factors. These include the waves of baby boomers nearing or already in retirement, the large proportion of super retirement assets held by SMSFs and greater longevity.

While almost half of SMSF members were aged over 60 at June 2018, more than a fifth were over 70, according to tax office statistics.

And SMSFs hold 56 per cent of overall superannuation assets invested in retirement products, reports the Superannuation Market Projections Report 2018, published earlier this year by consultants and actuaries Rice Warner. Estate planning

A starting point for super estate planning for SMSF members (as with members of any type of super fund) is to understand who is eligible to receive their superannuation death benefits. Another fundamental is to understand how different eligible beneficiaries may be taxed differently.

Superannuation benefits cannot be left indefinitely in an SMSF following death – even if the beneficiary is a surviving spouse and a member of the same SMSF. The amount must be paid out as a lump sum or continue to be paid as reversionary pension.

As part of their estate planning, many SMSF trustees prepare for the possibility that the most active member of a fund dies first. This is particularly an issue for two-person SMSFs where one member may be much more involved with their super.

‘Hardest aspects’

Surveys for the 2019 Vanguard/Investment Trends SMSF Report included asking SMSF trustees to name the “hardest aspects” of running an SMSF. Their responses – most being relevant for post-retirement planning – include:

  • Choosing investments (34 per cent of respondents).

  • Keeping track of changes in rules and regulations (29 per cent).

  • Managing accounting fees and charges (20 per cent).

  • Handling paperwork and administration (19 per cent).

  • Finding time to research investments (16 per cent).

  • Building sufficient wealth to not outlive retirement savings (11 per cent).

The most positive finding was that a fifth of SMSF trustees do not find any aspect of running their fund hard.

 

Please contact us on |PHONE| if you seek further discussion on this topic.

Source : Vanguard July 2019 

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2019 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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The valuable diversification benefits of international exposure

Posted On:Jul 31st, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

With protests in Hong Kong and an unresolved trade war between the United States and China, this may not seem like a wise time to invest abroad.

Looking beyond current events however, a sound investment strategy starts with an asset allocation, aligned to an individual’s goals, that is built upon reasonable expectations for risk and returns over the long-term. Well diversified

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With protests in Hong Kong and an unresolved trade war between the United States and China, this may not seem like a wise time to invest abroad.

Looking beyond current events however, a sound investment strategy starts with an asset allocation, aligned to an individual’s goals, that is built upon reasonable expectations for risk and returns over the long-term. Well diversified investments can help investors avoid being overly exposed to unnecessary risks.

Sticking with Australian companies whose names you know may provide a comfort factor, but there’s a chance you could be leaving yourself open to some risk. As my colleague Aidan Geysen wrote recently, the portfolios of Australian investors are often highly concentrated in a small number of Australian-based companies, a risk known as home-country bias.

Underweighting international assets could cause investors to miss opportunities to temper market swings. Politics, industries and consumer sentiment vary widely by country, generating different rates of national and regional economic growth. These variations can make your portfolio less vulnerable to downturns. During the 1990s to 2000s, for example, global equities outperformed Australian equities, so investors who owned both asset classes benefitted. At other times, Australian assets have outperformed.

While investors can choose funds that focus on a single country, constructing a portfolio that is well-diversified geographically will provide additional protection against volatility related to individual economies. For example, investors could choose to add to an Australian-centric equities portfolio through a global equity fund that tracks the MSCI World (ex-Australia) Index can achieve broad geographic exposure providing investors access to about 1,600 large and medium-sized companies across 22 of 23 developed countries. Top holdings include Nestle, Johnson & Johnson and Facebook, global brands that derive revenue from around the world.

Australians are increasingly using exchange traded funds (ETFs) to increase their exposure to international assets potentially due to their accessibility and diversification at low cost.

When you travel, currency fluctuations influence how much you get for your Australian dollar. Currency fluctuations affect international investments in a similar way, so you will need to consider whether you want to invest in a fund that hedges against that risk.

It’s important to remember that while international exposure is a great way to increase balance and diversification within a portfolio, it should be done in line with investors’ long term goals, rather than as a reaction to market events or cycles.

Sticking with an asset allocation strategy aimed at achieving your financial goals in a low-cost, diversified portfolio is more likely to lead to investment success than buying and selling in response to fear or volatility.

 

Please contact us on |PHONE| if you seek further assitance on this topic .

Source : Vanguard July 2019 

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2019 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page

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Beyond super: Our other personal investments

Posted On:Jul 31st, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

Given the attention on the size of Australia’s super savings, it may surprise you that personal investors in total have almost as much outside super as inside super.

The latest Personal Investments Market Projections report, recently published by consultants Rice Warner, calculates that the total value of super* and non-super personal investments was $5.5 trillion at June 2018. Non-super investments make up almost

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Given the attention on the size of Australia’s super savings, it may surprise you that personal investors in total have almost as much outside super as inside super.

The latest Personal Investments Market Projections report, recently published by consultants Rice Warner, calculates that the total value of super* and non-super personal investments was $5.5 trillion at June 2018. Non-super investments make up almost half or $2.7 trillion of this total.

Taking a whole-of-portfolio approach

Depending upon their circumstances, it can be critical for investors to co-ordinate their super and non-super investment portfolios. This includes for their retirement and investment strategies, strategic asset allocations for portfolios, periodic rebalancing of portfolios, tax planning and estate planning.

And when assessing the adequacy of your retirement savings, consider taking account of all of your investments, inside and outside super, in your calculations.

Defining a non-super personal investment

Rice Warner defines the personal non-super investments market broadly, including all investments outside super held by individuals – directly or through trusts and companies. Family homes and personal possessions are not counted.

Directly-held property together with directly-held cash and term deposits make up a huge slice of non-super personal investments in dollar terms.

While the value of direct property (excluding mortgages) accounts for 42 per cent of the assets, directly-held cash and term deposits account for more than 41 per cent. By contrast, direct shares make up 8 per cent of personal non-super investments.

Individuals hold 92 per cent of personal non-super personal investments directly rather than through investment products and investment platforms. (In this research, exchange traded funds are classified as directly-held investments.)

Many investors, of course, choose to hold geared and non-geared direct property in their own names – often dominating their non-super portfolios – while having more widely-diversified super portfolios.

Looking ahead

The report’s expectations for the short-to-medium term for the non-super personal investment market include:

  • Exchange traded funds (ETFs) will continue to grow in popularity as investors seek to improve portfolio returns by investing more in low-cost, index-tracking investments.

  • Direct property will remain a major personal investment, driven mainly by low interest rates and its tax treatment. However, the growth in the popularity of direct property investments is “likely to be constrained” over the short-to-medium term because of less investment from overseas and tighter lending standards.

  • Demand for share investments through investment platforms will increase as investors pursue higher returns in a low-interest environment.

  • Low interest rates will further encourage investors to reduce their fixed-interest investments and seek higher returns in other asset classes.

  • Pressure will continue for lower investment management fees.

  • Technological developments will continue the growth of self-directed online advice, “increasing allowing investors to make more sophisticated decisions”.

Personal non-super investments are becoming more important to wealthier, higher-income investors with the introduction two years ago of the superannuation pension cap and tighter contribution limits.

Over the next 15 years, Rice Warner projects that our personal non-super investments will grow in value to $4.8 trillion in 2018 dollars against $5 trillion for the superannuation sector.

How does the value of your non-super savings compare with the value of your super savings? And do you take both into account when setting the most-appropriate asset allocations and assessing the adequacy of your retirement savings?

*Super calculations include unfunded public-sector liabilities and government pensions.

 

Please contact us on |PHONE| if yiu seek further asssitance on this topic.

Source : Vanguard July 2019

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2019 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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Are you putting all your marketing eggs in one basket?

Posted On:Jul 31st, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

By Flying Solo contributor Cath Connell

We live in exciting times! New technologies have made it so easy to grow your dream business by providing low-cost and potentially powerful ways to connect with your audience – often without having to leave the comfort of your office (or dining table)! No longer do we have to rely on expensive, broadcast advertising, nor

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By Flying Solo contributor Cath Connell

We live in exciting times! New technologies have made it so easy to grow your dream business by providing low-cost and potentially powerful ways to connect with your audience – often without having to leave the comfort of your office (or dining table)! No longer do we have to rely on expensive, broadcast advertising, nor make those dreaded cold calls.

But the rise of social media as a marketing solution can also lure the unwary business owner into a bit of trap… relying solely on these platforms to create the vital connections that will help them build a healthy business.

Offering a low cost, highly-targeted marketing solution, social media has become a key focus in the majority of today’s business marketing plans. But it comes with its risks. Not only is the potential effect on your productivity (who hasn’t fallen into a social media time-sucking vortex every so often?), most platforms have sophisticated algorithms designed to maximise their profits and keep you coming back – which leaves you very much in the hands of their ever-evolving whims. Analysing your data to optimise your reach, navigating the latest changes to their ad platform, and creating a gazzilion different forms of content to keep up with new algorithm preferences, is a full-time job in itself. And if they suddenly shut up shop, what do you do then? (Anyone remember MySpace??) 

So what should you do instead?

Here are few marketing basics that will ensure your business has a strong foundation for growth, no matter what our beloved social media platforms throw at us!

Love your referral network

Word-of-mouth marketing is still the most effective form of marketing there is. In fact, I know plenty of businesses who survive almost solely on it – no live videos, no pretty Instagram feeds, often no website! A successful “tradie” friend of mine doesn’t even have a business card! As a marketing specialist, I don’t particularly recommend this approach, but it’s worth remembering that it IS possible to run a successful business without being across every new marketing trend.

Tell EVERYONE you know what you do, even if it’s just a basic outline. Some of my best referrals have come from personal friends, not just my business network. 

Network strategically. Going to a big networking event might give you the opportunity to meet new people and exchange a lot of business cards, but good referrals tend to come from closer relationships. Personally I prefer smaller community-type networking groups where we move regularly between in-person and online interactions. Give your time and expertise freely with your chosen community and be absolutely genuine in your referrals of others – not just because there is an expectation for cross-referrals. 

Take the time to build a few key connections and regularly touch base with them, so you have a good understanding of how you can help build each others’ businesses. You’ll probably develop some close friendships in the process! 

ALWAYS look after your existing customers. Follow up their enquiries promptly and be kind and courteous when dealing with any problems or challenges that arise. If appropriate, include them in your process of developing new products or services. Let them know if you can help them with other products or solutions that they are not currently buying from you, and remember to ask them for referrals too. If you would like them to write a testimonial, give them a helping hand by letting them know what areas you would like them to highlight. In short, love them to bits… after all, it’s much easier to keep an existing customer than find a new one.

Make sure you thank your referral partners when you secure new business. You could consider set up a formal arrangement where you take a finder’s fee or affiliate payment. Personally I prefer to send (and receive) a phone call, card or small gift. It feels more warm and personal and helps build our long-term relationship, rather than being just a business transaction.  

Create great content and use it to drive traffic to your website

As we well know, people buy from brands they know, like and trust. A great way to cover all these bases is to provide your community with useful and relevant content – an answer to their most basic problems, a new way to experience your product, or something that brightens their day. If you’re active on social media, you are probably already doing this.

However, it’s very easy for people to scroll through Instagram liking the pretty pictures, watch a video or live post, or throw in a few comments on Facebook, but it’s fairly low involvement. If you’re spending all this time and energy creating quality content, you want to get a return on your investment.

If you’re not linking your content back to your website, you are missing out on giving people the opportunity to get to know you better, find out what you do, and more importantly, buy from you! So whenever possible include a call to action on your posts – whether that be a “read more” link to a blog post on the subject, a button at the end of your video, an invitation to find out more about your product or service, or a promotion for your opt-in offer. You won’t always get a response, but it will be far more likely if you ASK.

Own your list

Building your social media following and communicating with them in a closed group is a perfect way to build a strong connection with your audience, but this data doesn’t belong to you – the platform has all the control and YOU are their product. 

So it’s important to make sure that you regularly invite your followers to join your mailing list, perhaps enticing them with a suitable opt-in freebie, competition or an exclusive offer with a traceable discount code. 

Ensure you keep good records of your existing and potential customers, so that you can contact them on YOUR terms. You don’t have to set up a complex Customer Relationship Management (CRM) tool, at least not to start with. Often a simple spreadsheet will do, so long as you have the information you need stored where it is easily accessible.

When you meet new people at networking events, ask them if they’d like to keep in touch with you through your e-newsletter, in addition to following you on social media. If an event attendee list is provided, NEVER bulk-add them to your list – this is not only spammy – it’s illegal! 

Also remember that even if someone agrees to be added to your list, this is not permission to constantly blast them with promotional messages. Email marketing is a great way to build TRUST, so it needs to be relevant, helpful and considerate of your audience’s time. Being invited into a person’s Inbox is a special privilege, and while most people will tolerate a little bit of promotion, they will quickly lose trust in you if you’re constantly in their faces. And once someone unsubscribes, they’re gone!

We are fortunate today that there are many ways to connect with our audiences. In fact there so many options, they can feel overwhelming. This is often the reason why small business owners spend all their marketing energy using only one or two options. 

The most important thing to keep in mind is that somewhere out there, there are people who are DESPERATE to know that you can solve their problem, but don’t yet know you exist… you don’t want to let them down, do you?

Source : Flying Solo July 2019 

This article by Cath Connell is reproduced with the permission of Flying Solo – Australia’s micro business community. Find out more and join over 100K others.

 

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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How to do competitor analysis

Posted On:Jul 30th, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

How many other businesses are going after your target customers? What are they offering and how are they delivering it? Answering these questions will help you build a competitive strategy and make your business stronger. Here’s how to do it.

The benefits of a competitive strategy

Your competitors – the ones you worry about, anyway – have successful businesses. They have customers

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How many other businesses are going after your target customers? What are they offering and how are they delivering it? Answering these questions will help you build a competitive strategy and make your business stronger. Here’s how to do it.

The benefits of a competitive strategy

Your competitors – the ones you worry about, anyway – have successful businesses. They have customers who like what they do, other businesses respect them, and they’re probably making money.

They’ve achieved all the things you want, while serving a similar market to yours. If you think of it that way, they’d make the perfect mentor. And while they probably won’t take you under their wing, you can make them your virtual mentor through competitor analysis. This kind of research can help you see:

  • what they’re doing better than you (so you can make improvements)

  • what marketing strategies and tactics are working for them

  • what mistakes they’ve made, so you can avoid them

  • what you’re doing better than them (so you can promote those things)

Taken together, all of these insights can feed into a competitive strategy. This doesn’t have to be a formal document. Your competitive strategy might simply exist within your overall business plan. But you should have one.

Who are your competitors?

There are two kinds of competitors to consider – those who have similar products or services as you, and those who have different products or services but which compete for the same dollar.

Consider the example of Netflix. They don’t just compete with other streaming services, they compete with cinemas, cable TV, YouTube, and other forms of on-screen entertainment like social media and gaming. Think broadly when you’re listing competitors. 

What to ask when doing competitor analysis?

Start with the big questions like:

  • Who are the major players serving this market?

  • Roughly how is the market split up between them?

Then dig a little deeper, with more specific questions like:

  • How does the market think about these competitors?
    Is someone the young person’s brand? Is someone else the cheap brand?

  • What sort of experience are they offering?
    How does their product or service look and feel? How does it work?

  • How are they delivering?
    What do they charge? How do customers order? What reviews do they get?

And for all of these questions, keep asking if your business could differentiate itself in some way.

Identify competitor strengths and weaknesses

As you learn more about your competitors, you’ll begin to see which ones will challenge you most. They might be in your region, or they might target the exact same market segment as you. List the strengths and weaknesses of these competitors.

Strengths might include things like:

  • great distribution – they’re in all kinds of shops, all over the place

  • huge brand awareness – they’ve been around forever and people trust them

  • really good networks – they’ve built lots of great relationships with buyers

  • low price point – it’s impossible for you to compete on price

Weaknesses might include things like:

  • a dull reputation – consumers don’t get a thrill buying from them

  • cheap packaging – their offering lacks polish

  • bad reviews – customers aren’t impressed with product quality

  • poor customer service – consumers don’t feel valued

By understanding your competitors’ strengths and weaknesses, you can figure out what differentiates you – and where you fit in the market.

What are your advantages?

When doing a competitor analysis, it’s important to consider your advantages. There may be things about your business that others can’t replicate, like:

  • Patents or licenses: Are you the only business that can produce a certain product?

  • Exclusive supply arrangements: You might be the only business in your area that can sell certain products.

  • Special processes: You might have a way of working that others don’t know about.

  • Lower costs: Maybe you can deliver products or services for less money.

It’s important to know where you have advantages like these. For example, you can play to these strengths in your marketing.

Will more competitors emerge?

Keep an eye on the future when doing your competitor analysis. If you’re in a hot industry, or you start doing really well, you might find a lot of new competitors enter the market. 

Ask yourself:

  • How hard would it be for someone new to come in with the exact same idea and take customers away from me?

  • How easy would it be for an established business to tweak their service or products to take away my competitive advantage?

The harder it is for competitors to replicate what you’re doing, the more comfortable you can feel.

Start your competitor analysis now

Competitor analysis will help with your business planning, your product or service development, and your marketing. An honest review of who’s out there and what they do well will help you find a part of the market you can own.

Find out who your competitors are, what niche they each serve, and where their strengths lie. Use the information to figure out where you fit in the market, and how you can maximise that position.

Whether you’re a new business or generations old, it’s never too soon to get a competitive strategy together.

 

Source: Xero 

Reproduced with the permission of Xero. 

Xero is software designed to make life better for small businesses and their advisors. Its online accounting platform provides the foundation on which businesses can build a complete business solution. It connects businesses with their bank, accounting tools, their accountant, payment services and third-party apps, so everything is securely available at any time, on any device. 

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

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How to find the best business ideas

Posted On:Jul 30th, 2019     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

Some of the best business ideas are crazy. Others are plain boring. There aren’t any magic rules for finding the good ones. Your best shot at picking the right idea is to make sure it’s a good fit for your personality and your skills.

About the idea

Maybe you already have a lot of business ideas but you can’t pick one. Or

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Some of the best business ideas are crazy. Others are plain boring. There aren’t any magic rules for finding the good ones. Your best shot at picking the right idea is to make sure it’s a good fit for your personality and your skills.

About the idea

Maybe you already have a lot of business ideas but you can’t pick one. Or perhaps you want to start brainstorming. There are just two things to remember about business ideas.

They’re allowed to be crazy

  • Amazon started selling books online when everyone was perfectly happy going to the store and keeping their credit card details off the internet.

  • Airbnb invited users to let their homes to complete strangers – people they might never meet.

They’re allowed to be mundane

  • You might take an existing product or service and do your own version of it at a lower price, or in a different location, or with some other minor tweak. 

  • Or you might find a weird little niche that no one else has explored yet. Throx did that. They sell socks in threes so people don’t need to worry about losing one in the laundry. 

Tips for landing on the best business ideas

As you come up with ideas, you need a way to pick the good ones. It’s an important choice because your next step is to invest time, energy and possibly cash exploring that idea. These three tests will help you decide on the best ones for you.

  1. Find ideas you’re passionate about
    Does the idea excite you? If you’re wildly passionate about your business then you’ll have much more energy and focus.

  2. Choose a business idea that fits with your skills
    Do you have years of experience, qualifications, contacts, or a special talent to use to your advantage? The more you do, the greater your chances of success and the less you have to pay someone else.

  3. Make sure you can make money from your idea
    You’ll need a plan for turning your idea into revenue. Some ideas can be monetised in many different ways.

Find a small business idea you’re passionate about 

Examine the ideas circling your mind. Do a few stand out as something you’d really like to try? Bring those to the top of your list. If you’re only just starting to brainstorm small business ideas, then focus first on areas where you have a passion.

If you’re passionate about what you’re doing, business will be much more fun. You’ll also find it easier to get up early, work late, and battle through obstacles. Plus your mind is better at absorbing information that genuinely interests you, which could help you learn faster.

Choose an idea that fits with your skills

It’s much easier to get a business off the ground if you can do a lot of the early work yourself. Otherwise you’ll have to hire a lot of professionals, and that’s going to get expensive.

Idea for an app? You should be able to develop a minimum viable product on your own. Want to open a hospitality business? You should know a thing or two about the service industry.

Relevant skills and experience will also be a big plus when it comes to getting finance. Lenders won’t even consider backing you unless your CV convinces them you know what you’re doing.

You don’t have to be a total expert before you start. It’s okay to learn on the job. But when you look at all the steps required to start your business, make sure you can take responsibility for a good chunk of them yourself.

How to make money from your small business idea

Once you’ve chosen your best business ideas, you need to figure out how to turn them into cash. That’s what a business model is for. It’s your plan for making money.

Business models are many and varied. Some types of business make money by selling goods to consumers (retail), others by selling goods to shops (wholesale), and others by leasing goods. Some businesses make money by charging clients an hourly fee for a service, while others charge a flat fee. These are just basic examples of business models. There are all sorts of creative variations.

Business models generally fall into broad categories like retail, manufacturing, software-as-a-service, professional services, and so on. Many categories have general rules about:

  • what customers are charged for

  • average markups on products or services

  • reasonable operating costs

Mixing business models

Your small business idea might lock you into a particular business model. If you open a shop, you’re going to operate pretty much the way other retailers do. But your business might allow you to mix up a bunch of business models.

If you’ve invented a product, for example, you might manufacture it, supply it to retailers, and sell it direct to customers through your own store. Try to investigate the business models that apply to you. An accountant familiar with your type of industry can give you great insights. 

Remember that you’re just choosing between business ideas at this stage. You don’t need a full financial plan yet. But make sure you ask yourself:

  • can I realistically make money from this idea?

  • do I need special expertise (such as wholesale experience) to make the business work?  

Once you’ve picked an idea to explore further, you should get a financial advisor to help work out the business model in more detail.

The best business idea is the one that fits you

When deciding on a business idea to pursue, make sure:

  • you’re genuinely excited by it, because you’ll spend a lot of time on it

  • you can carry it out (while doing a lot of the work yourself)

  • you have a plan for monetising it

Once you’re satisfied you can pour energy and skill into it, and you can see a financial return for those efforts, you’re ready to move to the next step. Start thinking about how to start a small business.

 

Source: Xero

Reproduced with the permission of Xero.

Xero is software designed to make life better for small businesses and their advisors. Its online accounting platform provides the foundation on which businesses can build a complete business solution. It connects businesses with their bank, accounting tools, their accountant, payment services and third-party apps, so everything is securely available at any time, on any device.

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