Engine Room Blog

Many business owners are technicians who go out to work for themselves… When does it become a real business?

In the words of Michael Gerber – Business owners have an “entrepreneurial seizure”.  They look at their boss and think if he (or she) can do it then so can I.  What they don’t think about is the investment in plant, premises and staff that the Boss has made, or all the other work they do outside of the technical stuff – payroll, sales, marketing, debt collection, accounts payable….

In a small business the owner becomes a “Jack of all trades” and often at little recompense for those extra hours they have to spend doing the “administrivia” for the business.  If you take the income you earn and divide it by the real hours you work in your business – what is your hourly rate?  I have seen some owners where this calculation has them earning less than the minimum wage – often their employees are earning more than they are.

So is it a business or a job?

A business is something that earns you a return on investment over and above fair recompense for the hours you work.  The business makes a profit of $150,000 before owner’s earnings, a fair salary is $120,000, you have a business.  

It should also allow you to live the life you want – taking the leisure time you would like, doing the work you want to do.  Otherwise you have a job – and probably a poorly paid one at that.

How do you turn it in to a business?

Have a really good look at what you are doing - talk to your accountant about how you can improve the performance of your business. 

Be brutally honest about whether you can grow your business to generate the profits and cash flow to allow you to live the life you want to lead.

Then make sure you have the right team to achieve what you want, up-skill yourself and your team, create an action plan and go for it.. or make the hard decision – sell or close your business, get a job and live the life you want.

Amendments to the Employment Relations Act 2000 mean that from 1 July 2011 employers are required to retain a signed copy of all employment agreements or current signed terms and conditions of employment.

Where an employer has provided an employee with an intended agreement the employer must retain the intended agreement even if the employee has not signed it or agreed to the terms and conditions specified. An intended agreement cannot be treated as the parties' employment agreement if the employee has not signed or not agreed to the terms and conditions.

If the employee does not accept an intended agreement, the employer should enter into good faith negotiations to reach agreement.  If negotiations are unsuccessful, the employer should record what happened and the outcome of the negotiations.  A copy of the intended agreement must be retained on file along with the current terms and conditions of employment, signed or unsigned.

Employers are required to provide a copy of the agreement on request from their employees.

From July 1 2011, labour inspectors will be able to seek a penalty against an employer who is in breach of legislation relating to employment agreements, including the requirement for all employers to retain a copy of the intended and current employment agreement or terms and conditions of employment, whether signed or unsigned. Employers will be given seven working days notice of to fix the breach. Where the breach is not remedied the inspector can take a penalty action in the Employment Relations Authority.  Click here for more information. 

Over the Easter period there are a lot of issues for business operators to be aware of.  Which days are public holidays?  What are the employee entitlements?  What days can I open? In 2011, there is an additional issue - ANZAC Day and Easter Monday falling on the same day.  Along with establishing what payments need to be made to employees for what days, there are also Shop Trading restrictions in operation on some of those days, under the Shop Trading Hours Act Repeal Act 1990, that business operators need to comply with. 

Read more here...

Running a business without a budget is like navigating a ship without a compass. As the financial year end approaches you need to set aside time to examine and revise your budget and cash flow to know where your business is now going and what challenges lay ahead.

Think about the key business assumptions and drivers and whether they have changed - in particular, your sales expectations and margins based on your current pricing.  Analyse your spending trends and plans for purchasing and overheads over the remainder of the financial year.  Identify and cost special projects that will take place, consider the impact on sales and costs of seasonal fluctuations.

How will the Canterbury disaster and the unrest in the Middle East impact your business?

Now that you have a realistic budget and cash flow do you know what it means?  What are the implications on your cash reserves or lending facilities?  Do you need to revise expenditure and projects to a time when there is improved cash flow from customer receipts?

It’s important to stay on course and stick to it, and compare it to what actually happens.  Sharing it with your team, financial advisors and accountant can help you ensure greater success in achieving it.

 Public Holidays 2010/2011

The general rule for public holidays is that they are taken on the day they fall. There are four public holidays that are treated differently.

These are Christmas Day, Boxing Day, New Year’s Day and 2^nd of January.

When any of these four public holidays fall on a Saturday or Sunday the first step is to look at your employees’ work patterns. You need to determine if the public holiday falls on an employee’s ‘Otherwise Working Day’. You can use the Department of Labour’s Holidays Online Tool to help you with that. You can then use this chart to help you determine which day the public holiday will be taken.

*If the day that the public holiday is taken on is not an otherwise working day for that employee then the employee observes that public holiday as an unpaid public holiday.

• Additional information on Public Holidays,
• Use the Holidays Online Tool
• Get information on the proposed changes to the Employment Relations Act 2000 and Holidays Act 2003