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Business is not all champagne and tax-free Teslas

 

I write often about the joys of having your own business, and there are many.

It’s not all tax-free company Teslas and Pol Roger Winston Churchill champagne though. There are downsides, like spending money on things you hate with the burning intensity of a thousand suns.

You have to spend money to make money, as the ol’ saying goes. Paying bills is an inescapable part of business, and you can use it to your advantage if you have your cash flow under control.

A genius, often-overlooked strategy

 

Paying suppliers quickly is a genius, often-overlooked strategy to create sunny goodwill that serves you well in the future.

You’ll get quick attention and pleasant service from those suppliers when you need it. While their other customers pretend they haven’t received the invoice yet, blame an A/P department in North Dakota, and all the other excuses that add 50% onto the cost of dealing with them.

Whatever your approach, you must pay your bills, so just deal with it and move on to more pleasant things.

Often spending money is outright enjoyable. Hiring more staff. New assets. Those payments bring a pleasant feeling that you’re going places, with happy hopes of future returns.

Then there are expenses that just suck, bring you zero benefit or joy, and raise your blood pressure every time you pay.

Everyone’s list is different, but these are my Top 5 Business Expenses That Can Get In The Bin.

 

1. Payroll Tax

 

Oh cool, a tax to make hiring more people painful. Not only does it suck as a general concept, it is a nightmare to administer in a business like ours that runs across five states.

Payroll tax nearly killed us in in our early days. We had separate companies in four cities. As we grew, we were being (we thought) prudent about our tax. Four years in, a couple of the businesses around the country were nearly at a size where they’d have to pay payroll tax. We were ready.

Then I got a call from our accountant, saying the Tax Office had been in touch. Turns out, due to common majority shareholders, all our companies were classed as one business. We should already have been paying payroll tax. We should have started eighteen months ago.

We had a back-tax bill of $120,000. Due in a month.

We scraped through but the mere mention of its name still makes me stressed. Payroll tax is an admin bin fire, and to this day we must juggle a maze of different rates and thresholds across the country each month.

The only good thing that can be said of it is at least it’s a tax multinationals can’t evade.  While they pretend Australian sales revenue is royalties paid to their Ireland office on the way to Bermuda.

But there has to be a better way to do that. The current system penalises labour-intensive industries for no good reason.

Because I’m a considerate writer, I wrote a couple of paragraphs of thoughts on taxation reform, then deleted them. Enjoy that extra minute of your life with my compliments.

 

2. Google sponsored search on your own brand

 

I’m puzzled why this one isn’t high on the rap sheet in current Google anti-trust cases.

Most businesses need Google results to survive these days.

You search your company name. You get a full screen of competitors with sponsored results. The only way around it is to sponsor yourself. Now you’re at the top of the list. But no customer is going to scroll past a whole screen of sponsored results to click on your organic result.

So now you must pay Google literally every time a customer searches you.

That’s an out-of-control shakedown racket.

The only good thing about this is that Google has grown complacent from this ocean of easy cash with little competition.

Open AI and others are starting to make inroads in their search business and Google is struggling to keep up. Their search results have been corrupted for too long by presenting what’s good for them, not for you.

Google’s share of the search ad market is expected to drop below 50% for the first time in a decade. This competition is good news for every business in the world not named Google.

 

3. Software subscriptions you don’t use

 

They just multiply like weeds across your business. Each seems pretty reasonable by itself. Then we realised it’s tens of thousands a month.

Absolutely fine if they’re being used to make people productive. If they don’t, that’s where the trouble starts.

You needed that software for a while and now you don’t, but you’re trapped.

Example: the video sharing platform where we needed the Pro version for a while, but now we don’t. But if we drop back to the non-pro version, it’s going to delete every piece of content we uploaded after we started paying for it.

We’re stuck paying it forever. There’s so much of this.

Software you’ve been paying for for two years and you ask if it’s being used. You find out we’re still waiting to get people on the training course to use it.

Special poke in the eye with a chili-dipped stick for subscriptions that you can start online, but have to be cancelled by phone, fax, registered post or telegram during USA business hours. Straight-up scammer behaviour.

 

4. Speeding tickets on company vehicles

 

Nobody can quite recall who was driving that day so you will pay five times the value of that fine. Always a treat for business owners.

I am aware of a business that makes staff who damage company vehicles dress up in a comedy costume for the day. Not the worst idea I’ve ever heard.

 

5. Building lease bank guarantees

 

Of all the bags of dicks on the cashflow ledger, this is the one I hate the most.

6-12 months’ rent for your office or premises, locked into a bank account as security for the duration of the lease. Basically forever unless you plan to end the business.

We have high six-figure amounts sitting in banks around the country doing nothing but lose value for decades. You earn a bit of interest, which you have to split 50/50 with your annoying landlord.

It is the worst, we could be doing useful things with that money.

There are alternatives that use a surety bond instead of piles of your cash, but they’re only accepted by name-brand corporate landlords. When you’re like us, and your landlords are mostly older tracksuited guys with massive ear and nose hair, it’s cash all the way.

Thank you for listening to my extended whinge, it’s been therapeutic and I’ll write something cheerful next week.

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Zoë Foster Blake said: “Ian is a cheeky, funny, disruptive (and proven: important) business rascal and thank goodness for that.”

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