You have now developed your trio of key foundation statements:  ”Mission Statement”, “Vision Statement” and “Values Statement”.

Next, it is time to look at the structure of your entity to ensure it is meeting your business requirements. The first structure question is the legal structure of your organisation.

If it is just you or you are just starting out, operating as a sole trader is the simplest and cheapest structure. Your income and deductions go through your own personal tax return. You are solely responsible for decisions but have no protection from personal liability if sued.

Partnership is the next option if you are operating with a partner/s with distribution of profits/losses split between partners. Each partnership has its own Australian Business Number (ABN) and Tax File Number (TFN) and Tax Return, but income tax is paid by each individual partner on their share of partnership income. It is best to have a formal signed partnership agreement to ensure the partnership operates as you intend it. It is relatively cheap to create, but each partner is personally liable for partnership liabilities even if caused by another partner.

A Company is a separate distinct legal entity, hence has its own ABN and TFN, lodges its own tax return and pays its own tax. It is owned by shareholders and run by its directors and is relatively expensive to create as well as having ongoing reporting requirements and costs with the regulator ASIC. Being a separate legal entity, the assets and monies earned by the company belong to the company. Shareholders receive income via dividend distributions. The key advantage is that shareholders are protected from being personally liable if the company is sued. Directors can however be held personally liable in some instances for company debts and liabilities.

The forth legal structure option is a Trust. Trusts can be expensive and complicated to create but are attractive in terms of asset protection and can offer tax effective income distribution benefits. The Trust Deed explains clearly how the Trust is to operate. A Trust has its own ABN and TFN and may be liable for tax under certain circumstances.  The Trustee (an individual or company) operates the Trust with the Beneficiaries receiving taxable distributions from the Trust. The trustee is personally liable for all contracts the trust enters into with the Trust

Use this week to consider which business structure best suits you and your entity. Speak to your Accountant or Legal Advisor should you need to seek further advice.

Next week we will look at the internal organisational structure of your entity as you continue building a sound foundation for business success.

So far, you have looked at your business’ Mission Statement and Vision Statement describing “Why your entity exists” and “What your entity will be in the medium to long term”.

Next, it is time to look at the third foundation statement of your business: the “Values Statement”. This statement briefly describes “how your business and employees will conduct themselves”. It houses the core beliefs and values central to the entity. The “Values Statement” generally remains unchanged over time and can be used to build relationships with customers and suppliers, as well as building a positive internal culture.

Developing a “Values Statement” is best undertaken as a brainstorming process. Try beginning with the phrase “We believe in…” It is wise to reflect on your own individual values as your business is a reflection of you and hence the business’ values should enshrine what you stand for. Limit the final version to four or five core values with some simple concise wording around each one.

Examples of some values you can consider  are ‘Respect’, ‘Integrity’, ‘Diversity’, ‘Service’, ‘Inclusion’, ‘Commitment’, ‘Innovative’, ‘Collaborative’ and ‘Candour’.

The core values need to permeate your organisation to ensure they are not just words but rather the foundation for behaviours and ethics of the entity. An effective way to achieve this is to have the “Values Statement” values incorporated into your performance appraisal process.

Creating and communicating a “Values Statement” across your organisation ensures employees are aligned and helps employee engagement. It is a useful tool in the recruitment process to ensure new hires are a good fit not only within the organisation but with colleagues. A good Values Statement will help create a positive inclusive work environment.

Examples of some well-known entities “Values Statement” follows:-

 “Integrity, Commitment to Excellence, Customer Orientation, Shareholder Focus” –Bombardier

“Leadership, Collaboration, Integrity, Accountability, Passion, Diversity & Quality” – Coca-Cola

“Reach, Learn, Di-bear-sity, Colla-bear-ate, Give, Cele-bear-ate” – Build-A-Bear Workshop

Use this week to develop, review or modify your Values Statement to ensure you are creating a winning culture and building a sound foundation for business success.

Ross – Virtual CFO

Last week we created your business’ Mission Statement describing “Why” your entity exists!

This week it is time to take a step forward and imagine the big-picture “Vision” of “What” the entity will be in 3, 5 or 10 years time. The vision needs to be descriptive and provide clarity of focus, setting priorities and the direction of the entity in a compelling statement for all employees.

This is the creative, yet serious piece of the strategic process, and it is usually best undertaken as a brainstorming exercise. Don’t worry about the practicalities of “how” to achieve your vision at this stage. Just let your mind imagine “what” your business can be. The importance of this stage is not only creating the final version Vision Statement itself, but also the process of building the vision with your team.

Try starting the brainstorming process with the phrase “We will…” Consider such things as what do you want to be in terms of the market segments you operate in, your geographic reach, sales projections, headcount size, financial position, what problem you want to solve or what success will look like. Focus on things that really strike a cord with you and put them in a ‘wish list’. It will take many drafts before a final concise version of your Vision Statement is crafted from this wish-list. Keep it simple, and limit the final version to a single sentence or a few concise paragraphs.

A couple of company Vision Statements follow as examples:-

“Our vision is to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.” – Amazon

“Become number one or two in every market we serve and revolutionize this company to have the strengths of a big company combined with the leanness and agility of a small company.” – General Electric GE

Use this week to develop, review or modify your Vision Statement to ensure you are working towards your medium to long term vision and building a sound foundation for business success.

The first step in formulating your business’ Strategic Plan is to develop or review the organisation’s mission statement. A mission statement is a short, simple statement answering the question “why do we exist?” or “what is our reason or core purpose of existing?” It should pass the T-Shirt test, meaning it is short enough to be printed on a T-Shirt, and is generally unchanging over time.

A simple way to think of starting your mission statement is using the opening phrase “To be/provide/help…” Take your time developing your mission statement. Talk about it with your team and ensure that everyone is aligned and has bought into the entity’s mission statement development.

Examples of mission statements for some well-known companies are:-

“To constantly improve what is essential to human progress by mastering science and technology” = Dow Chemicals

“We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world” = Ford Motor Co.

“We fulfil dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments” = Harley Davidson

“To be the best worldwide provider of higher-value staffing services and the centre for quality employment opportunities” = Manpower

“At Microsoft, we work to help people and businesses throughout the world realize their full potential” = Microsoft

“To Bring Inspiration and innovation to every athlete in the world” = Nike

You can see how these simple but powerful mission statements inspire and frame their business success.

Use this week to develop, review or modify your mission statement and build a sound foundation for business success.

Business Success

This is the first of our weekly blogs focussed on business success.

Whether you have been in business for years or are considering starting a business, going through a strategic planning process is an invaluable exercise on which to build business success.

Over the coming 3months, each week we will step through the process of developing a strategic plan with the objective of having a budget ready for the next financial year at the end.

It is up to you whether you embark on this journey on your own, or with a trusted advisor or business partner, or your significant other, or your management team. Maybe you are just following along out of interest only, that is also fine too.

The key criteria is to get you working on your business, and not just in your business.

Just keep an open mind and I look forward to sharing more with you next week.

Thanks Ross

Your Virtual CFO and Costing specialist