There are two vital partners in your business.
They are partners because they hold more sway over your efforts than any other party. These two will give you more sleepless nights than any other gang. On top of that they close more firms than you can conceive of.
Date: November 6th, 2008
From: Peter Carruthers
The first of these crucial business partners is your bank.
They process each penny that flows through your concern, and if they mess up the results are dire. They control your financial record but you pay the price if they make a mistake.
Your bank is also the first place to go when you need more money. Banks love businesses because they always need more money. They are very good at dealing with entrepreneurs because they deal with thousands of us each day. Most of us will only discuss money with a bank about once a year. Who do you think is better at it?
Before setting up my own firm in 1984 I was a banker. (I even have the diploma to prove it.) My banking knowledge helped my trading efforts a lot. But it was only when that first venture closed in 1992 that I really learned why banks make you sign as much paper as they do.
Let me explain.
Your bank makes money by renting out the use of their money. They call it lending. The payment you make each month for the use of their money is called interest. It is the price of the money that you borrow from them.
I was stunned when I did some ad hoc research a few days ago. I called ten of my clients. All own ventures that I think are thriving. Not one of them knew quite what price they were paying their bank for the money they were borrowing.
Why is this so? When you need a car, would you buy it without checking to see what other dealers might be offering it at? Buy it without asking for the price?
When you borrow money from the bank, their job is charge you the highest price they can. Your job is to pay the lowest price you can. Who wins? Here is a clue: 95.6% of overdraft users could slash 30% off their interest bill each year if they had a little training about how to borrow money. 90% of business owners won’t even get an offer from a second bank. (No, not all banks are the same on any given day!)
On a R100,000 overdraft, that means that we give our bank R6,000 more than we should, each year, because we don’t know how to get that money more cheaply. (If ten of us borrow money, more than nine of us are paying too much.)
In return for lending you some money, at a higher price than they have to, banks want security. Mostly this means that they secure their lending by taking transfer of a piece of your home, or your life assurance contracts, or anything else that you might have that has value. In other words, they cannot lose if you make a mistake.
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Your bank controls the flow of money through your account. A while back one of my clients called in a panic. He had a R50,000 line of credit with one of the big four banks. He had paid a large cheque from one of his clients into his bank account. Then he had written out cheques to all his own suppliers. The incoming cheque bounced. As his suppliers paid in the cheques he had given them, his account balance fell below his agreed limit. So his bank bounced twenty little outgoing cheques. (Yes, they could have bounced four bigger cheques, but the cheques arrived in the wrong order, I am told. ) He scrambled to gather enough incoming cash to get his account back to zero so that he could replace the bounced cheques. They bounced again. By now his bank had cancelled his facility because he had written so many bad cheques. (The bank is allowed to cancel your credit at any time, for any reason.The best time to cancel it is when there is nothing owing. As his cheques to suppliers started to bounce again he tried to open a second bank account to regain control. But his new bank wanted proof from his old bank that he had not bounced cheques in the past twelve months… Since I started teaching the CrashProof principles in 1995 I have heard a variant of this story each month. |
We confuse relationships. Your bank is not your friend, it is a supplier of services. While it will often rent to you the use of the bank’s money, the duty to shareholders outweighs any to you and your family.
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Your bank takes more power than you think you give. I closed my first business in May 1992. I had told my bank the previous month that their R200,000 advance would be repaid as we closed. On May 31st, the assigned day, the balance was a mere R8,000 in the red. On June 4th I got a call from my bank manager. “Well done,” he said. “We didn’t think you had a hope in hell of doing that. It doesn’t happen often. And don’t worry about that last R8,000. We took it from your private account his morning!” Since then, I have heard this same story from dozens of ex small business owners. (And yes, we had all signed a contract that allowed them to do this. So have you.) |
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The information you provide
is so relevant these days, and the
manner in which you deliver it is
superb. The banks have a strangle
hold on us these days, and we have
been brainwashed into thinking that
there is nothing we can do about
it.
Allan Bolt |
When last did you get any serious insight into the workings of a bank, and how they deal with money? I blush when I have to admit that this knowledge cost me more than R2 million when I closed my firm in 1992. Since then I have tried to share these skills with as many people as I can so that they do not have to make the same mistakes I did (and that we all do).
May I invite you to join me at the CrashProof your Business seminar in the comfort of your own home?
Let me explain. I had a professional quality DVD made of one of the 4 recent R1497-per-seat Crashproof seminars I presented to 286 small business owners in Johannesburg, Durban and Cape Town. This 3 hour long DVD will give you the skills, knowledge, and mettle to:
- Design your finances so that you can borrow the same amount for 30% less than it is costing you now;
- Borrow money without the binding contracts that take away your life assets;
- Release your home and other assets from the bank;
- Build new streams of credit to bridge those times when you need it;
- Rearrange your affairs so that your private assets can never be attacked, no matter what happens to your venture.
The second of these crucial partners is SARS.
They’re your partner because you may not run a business in SA without paying SARS for the right. They’re even tougher to deal with than the banks because if you make a mistake (or if they think you have made a mistake) they will fine you, and threaten you with jail..
They want you to pay them:
- VAT (Value Added Tax) on all your sales;
- Personal Income Tax (you pay it as PAYE) on all your private income;
- Income Tax on all your business profits;
- UIF (Unemployment Insurance Fund) contributions for all your staff;
And they get really upset with you if you miss a payment, or worse - stop paying them because your firm has failed.
SARS have a hostile approach to your efforts, and the money you owe to them as a result: you can run but you cannot hide.
For instance, choosing to go bankrupt because you cannot pay your bills works rather well. You lose all your assets, but in return all your debts are wiped out. Except your debts to SARS. Their bill will amass interest every year until you die, at which point they will extract what they think you owe them from your estate. (Of course, this won’t stop them asking you for money at awkward points en route!)
May I invite you to join me at the CrashProof your Business seminar in the comfort of your own home?
The DVD will teach you enough command and confidence to:
- Arrange your personal affairs to preserve your life assets from anybody;
- Ensure your firm will survive your death;
- Avoid the mix of taxes you would normally have to pay on your death;
- Wipe out any outstanding taxes due to SARS that they could normally take on your death.
When I closed my business I lost
everything I owned -- about R1 million in
1992 terms. And then I took judgments for
another R2 million that the business didn't
owe! (I cover how this happens as to most
folk as we work through the seminar.) This
knowledge cost me blood, and I learned it too
late.
(I am selling these at half price because the global economic situation is getting so bad that most of my clients are facing deep challenges. So you get the DVD - and everything I learned when I went out of business - stuff that nobody else is even talking about - for just R297.)
You'll get the full seminar on DVD and:
for only Your investment was R597.
R597-00 R297-00 (plus R50 courier costs).
Your family is relying on you to look after them - just as mine is. I let them down in 1992, and since them I have devoted my life to making sure that you have the knowledge not to make the same mistakes I made. So far I have helped more than 30,000 business owners do exactly that. Please allow me to help you. Knowledge is often frightening, but always empowering.
I'm sorry but these DVDs are no longer available for sale from this website. The South African Post Office managed to mess up the delivery so often that we can't be sure that you'll actually ever get them unless we send them by ox-wagon. I'd prefer to save both of us this frustration. You'll be able to download the DVD from the Business Warriors website from mid March 2009 as part of your membership benefits.
Peter Carruthers|
Business Warriors UK
Ltd
PO Box 4321, GATEWAY, KZN, South Africa |