There’s a saying that goes ‘I’d rather have 50% of something than 100% of nothing’.
It is a piece of old-world wisdom that’s strikingly relevant for today’s business leaders and can apply to everything from your company’s attitude towards risk, to its mindset on growth. It is, however, most relevant when applied to a business’ approach to paying tax.
You see, many businesses these days are consumed with trying to avoid paying tax. They perceive that the biggest companies in the world are getting away with it, so why should they have to cough-up.
But this is the very attitude that could be holding these businesses back. If their attention is on how they can avoid paying tax, then they’re likely to expend valuable energy focussed on the wrong thing.
Instead of thinking ‘how much tax do I pay?’, their efforts should be centred on all of the facets of the business that are going to build a strong and thriving operation.
Tax isn’t an opportunity
Unfortunately, too many businesses see tax as an opportunity, rather than what it is – a transaction.
It’s a problem that’s particularly widespread among small businesses, where the owners have bought themselves a job, and are focussed on quarantining or claiming as much money as they can, rather than building something that has value and that they can potentially sell in the future.
Worst still are the businesses that spend money in order to realise a tax benefit. If the purchase isn’t going to add value to the business, then don’t spend the money.
Don’t get me wrong, I’m not saying that you shouldn’t set your business up in the most tax-efficient manner possible – you certainly should. And there’s plenty of good advisors out there who can help you do that.
But don’t spend a disproportionate amount of time on it. Instead, put the time into structures that will grow your business and increase its value over time.
Remember, there’s nothing wrong with paying tax. It means you’re growing a prosperous and valuable business. And I’d much rather have 50% of a thriving multi-million business, than 100% of a struggling rabble.
If any of the above rings true or hits close to home, even slightly, then here’s what to do about it.
Stop obsessing about tax
Firstly, stop considering tax when making business decisions. Stop thinking ‘how much tax do I pay’ and make decisions based on the value to your business. Get yourself a good CFO or business advisor, and set your business up in the most tax-efficient manner possible. By doing this, your tax will take care of itself.
Set a plan
The next step is to make sure you have a very clear business plan in place, and then revisit the plan at short intervals to see how you’re tracking. Make sure your plan has clear measurables to track your progress. Review every business decision based on how it is supporting your plan and helping the business. This will keep you focused on the big picture.
Get the right team
No one person can ever have all the answers. This is particularly true for small businesses, or sole operators, where the business owner or entrepreneur can’t be expected to be the master of all trades. It’s important to get the right people around you, whether that be employees or external advisors. These people will keep you accountable to the plan and provide a valuable sounding board for business decisions. And yes, they may also be able to help you minimise the tax you pay.
Invest in your business
Stop seeing money spent on growing your business as a cost, but instead see it as an investment in building its value. Take a big-picture view and aim to build something of value. Yes, not every decision is going to pay-off big, but your commitment to creating something worthwhile will.
Automate where it makes sense
Don’t spend more time than you need on repetitive tasks such as record keeping. Implement an automated system that will streamline transactional activities, such as tax. This will free up more of your time to focus on the growing and building your business.
Having a feedback mechanism, particularly from an external source that isn’t emotionally or financially tied to the business, can provide an honest viewpoint on how you’re tracking and ensure you stay focused on the big picture. This may come in the form of an advisory board, or external business advisor. While this will come at a cost to the business, the long-term rewards will outweigh any short-term expenses.