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Planning for Surplus

So, 2018 has begun. It’s that difficult time of year when we have to shake off the holiday malaise, crank the wheels and get back into the business of making a living. Our first steps will say a lot about how we approach not only our work, but also life, rest and relaxation in the year to come.

I think the best place to start is by thinking about surplus. Surplus is probably the last thing you want to think about right now. Christmas, New Year, summer holidays—they’re all about indulgence, and your savings, your credit card, and your budget may still be recovering. Your natural instinct is to steady the ship, tighten the belt, and think about the cuts you can make to catch up and regain some control over your fiscal responsibilities. But I would argue that’s only half the picture—and that now is the perfect time to think about a different kind of surplus; not ‘over-indulgence’ but the surplus that your business is capable of generating, but which you might be missing out on because you haven’t planned for it. 

What I’m talking about is the kind of surplus that will allow you to do the important things throughout the entire coming year—including rest and relaxation, which are vital to your health and success in the future.

Let’s break this down.

One of the most common conversations I have with my clients is about how they can improve their business. I see many businesses where the status quo is just not sustainable. You might be making an okay living, but you aren’t saving anything. You’re certainly a long way off having enough for a house deposit, if that’s the thing you’re working towards. You may also feel short of energy and short of time. It feels like your business is demanding so much of you that you have nothing left to give, either to family or your community or your friends. And yet, you’re just not getting anywhere. It’s like wading through mud. Sound familiar?

The good news is, you’re not alone. Many business owners feel the same way, and in my experience it comes down to a basic misunderstanding of the importance of surplus. 

I recently became aware that even in my own life I have so little surplus time for the things that are important to me that I do can silly, irrational things (like buying a boat!). I get caught in the cycle of believing I need to reward myself, which leads to addictive type behaviours (such as spending money that could have gone towards a long-term goal). I realised that I had to make some hard decisions. So, I said No to four demanding areas in my life in order to free up a surplus of time and energy to do other things. I confess I’m not good at setting goals, and this was the first time in a while I had sat down to think about the future in a structured way.

What I discovered was the importance of planning for surplus well before it is needed, in business as well as in life. Just as we need to factor surplus time into our family life well before it’s required, we need to build the expectation of surplus into our businesses for the coming year, so that we have spare money for new equipment, for example. If we only plan to make enough money to pay our bills, that’s all we will make. Surplus isn’t something that’s typically generated by accident—it’s something we need to aim for.

Where should we begin?

A good place to start is to have a realistic expectation of earnings. If you need to make $150k this year (including your healthy surplus), then do you know what you need to turn over to get that result? Do you know how much it costs to deliver the service or sell the product that makes you money? It may be that you need to turn over $500k to make enough to pay the bills and bring in the surplus that will give you the freedom to have time with your family, or to be a part of your community, or to have regular days off for your own wellbeing. Is your business capable of turning over $500k? If not, what can you do about it?

This is where your accountant comes in. 

My advice, as we begin the year together, is to ask yourself a series of questions. What do I need to stop doing this year to free up some time? What hasn’t worked in 2017? What has worked in the past and how can I do more of it? These sorts of questions can be very useful, and they’re the sorts of questions we can ponder together in the process of improving your business over the coming year.

It’s nice to pause and be thankful and to acknowledge that you have survived another year. But it’s also good to admit that you don’t want 2018 to be a repeat of 2017, and that you need to see some improvement. One of the best improvements you can make this year is booking in some time for rest and relaxation—you’ve earned it! 

Let’s talk together and work out how to make it happen.

Here’s to 2018,


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