Category: Wealth Management
The Tax Implications For Multiple Income Streams

Today, it’s not uncommon for people to have multiple income streams; freelancing in addition to permanent employment can be crucial to survive. If the pandemic has taught us anything, it’s that having an emergency fund is vital to safeguard us against unforeseen events. You may also be drawing annuity income from a product such as a life annuity. There are specific tax implications for having multiple streams of income, and if not fully understood (and budgeted for), you’re likely to be hit by a hefty bill from the South African Revenue Service (SARS).


Drawing an income from an employer salary and an annuity

Imagine that you earn a salary from your employer and draw an annuity income from a product such as a life annuity. In this case, both the employer and the life insurance company (the life annuity service provider) will deduct Pay-As-You-Earn (PAYE) tax from the income you’ve earned and pay it to the South African Revenue Service (SARS)

  • Brief recap: Retirement annuities and life annuities

You can only access the funds from a retirement annuity when you reach 55 years of age. One-third of those funds can be drawn tax-free up to R500,000 over your lifetime. The remaining two-thirds need to be moved into another savings product, such as a life annuity. If you draw an income from the funds in the life annuity, you will pay tax on each withdrawal.

  • The problem

The employer and the life insurance company might only see the income that they provide to you. This means that they both apply the annual tax rebates when estimating your tax liability. These rebates should only be used once and, in this case, could potentially be applied twice.

Furthermore, they use an incorrect tax rate, e.g., too low a tax rate because the other stream of income isn’t accounted for, and the combined income could potentially push you into a higher tax bracket.

Ideally, the tax assessment should show that you have a tax liability that surpasses the tax already withheld by their employer and the life insurance company during the assessment year. However, in this case, your tax calculation will be inaccurate.

  • The result

Your employer and life annuity service provider are likely to owe money to SARS because the evaluation revealed a tax debt. Because according to South African tax law, you need to pay income tax on any local and international taxable income. These amounts are combined to determine the total tax liability.


How can this be fixed?

To assist taxpayers from falling into this situation, the Income Tax Act permits you to make additional voluntary tax payments. Speak to a business consultancy that has access to independent financial advisers and tax professionals. They can provide you with all the information and processes you need to arrange for a voluntary additional PAYE deduction or make provisional tax payments to SARS. (This takes place twice a year, February and August for an individual).

The recommended way to manage this: identify your total tax liability, meaning you must account for your multiple sources of income. Once you know the total amount, the correct tax rate can be calculated.

It would be beneficial to ask your annuity provider to apply a higher marginal tax rate to your annuity income. Implementing this usually allows them to withhold more PAYE from your income during the tax year. This will play a significant role in assisting you to avoid unforeseen tax bills when you file your tax return with SARS.


Freelancing in addition to permanent employment

If you have a permanent job and choose to also do some freelance work on the side, the income you make from the freelance work needs to be submitted as additional income and is usually taxed at 25% when you file your tax return. So, it’s very likely that you’ll end up paying SARS money instead of receiving a refund. However, tax-deductible contributions made to products such as a medical aid scheme and/or investment products can soften the blow.

The adage, knowledge is power, is appropriate. Knowing how income tax works and calculated are vital. In addition, by understanding tax, you can mitigate potential financial issues by

  • Budgeting for the likelihood of having to pay the tax due to multiple income streams. E.g. Every time you receive money from a freelance project, put 25% of the total in a readily accessible savings account such as a Money Market to have funds available to pay SARS.
  • If the company offers to make the necessary tax deductions themselves, accept the offer.
  • Speak to a business consultancy with access to expert independent financial advisers and tax professionals who can assess your tax situation and provide you with the guidance you require.

In conclusion, if you earn multiple streams of income from a permanent job and a life annuity or freelance work, you must include it on your tax submission; you must know how to rectify any potential financial issues that may occur.

The Leading Causes of Business Bankruptcy

Bankruptcy doesn’t discriminate. Whether you’re an entrepreneur trying to break into the market with an ambitious start-up, or an established corporate, running out of capital and having to declare insolvency is a potential reality. There are numerous reasons why bankruptcy can occur.

The pandemic has taught us a proper lesson: a robust overarching business strategy should be agile and flexible enough to incorporate emergency amendments. So, in this light, let’s look at some of the main reasons why companies may file for bankruptcy.


Market conditions

 It’s almost impossible to predict market conditions accurately; there are so many influential variables. Therefore, it’s crucial how and where you invest the business’s funds. If you blindly put into a fund that promises high returns, it generally means that the fund is more susceptible to market volatility. You may not be able to afford periods of prolonged underperformance.


Employee mismanagement

Richard Branson put it best: ‘Customers come second, employees first.’ It’s an attitude that generates an emotional ‘profit’ to both the business and, by extension, your clients. How you treat your employees has a significant ripple effect that can influence client acquisition, output efficiency and general morale.


Poor management skills

Employee management presents a dichotomy: on the one hand, employees are hired to perform a job for which they will receive compensation, but they’re also red-blooded human beings and deserve to be treated with dignity and respect. A leader must be able to view every employee from a holistic perspective. A mistake or error doesn’t equate to incompetency, and continual discouragement is entirely counterproductive.

Result: A high-staff turnover rate and damaging brand reputation.

Please understand that effective communication between you and your employees is crucial for business success. The workplace should have an inherent, unique culture or ‘personality’ that resonates with all employees to ensure they enjoy working for your business.

Tips for better communication include:

  • Actively listening to any issues your employees may have.
  • Scheduling regular one-to-one meetings.
  • Understand unspoken signals – e.g., negative body language; overall apathy and act accordingly.
  • Recognising and praising employees’ work.

Excess use of credit

Very few businesses have the luxury of an unlimited source of capital. At some point, using a credit facility is likely to be necessary. There are different types that a business can utilise, such as

  • Business loans from a financial institution, e.g. a bank
  • Alternative business funding, e.g. private companies that offer business financing
  • Business credit cards (short-term credit solution)

Standard business loans

The major banks in South Africa typically offer several loan options, such as fixed-term and revolving loans. Interest rates are usually personalised; they are determined by factors such as the amount of credit, repayment period, and risk profile. Whichever you choose, you’ll have minimum instalments that you must pay. If you don’t have a solid budget strategy, overspending can reduce your cash flow, causing an irrecoverable negative financial ripple effect.


Alternative business funding

These are private companies that tend to partner with banks, lenders and have particular service options depending on your credit needs.

According to an article published by Business Tech, “There are more than 2.5 million small and medium-sized enterprises (SMEs) in South Africa; however, accessing funding remains still a major challenge for many entrepreneurs. SME lending is a massive gap and a global problem. As SMEs are the lifeblood of any economy, these new financing players must succeed and meet the needs of this market.”

This is a fantastic option for start-ups and SMEs, but it’s still a credit agreement. It can easily be abused by unnecessary spending.


Business credit cards

We all know how easy it is to swipe the business credit card, and, poof, you can have your desired item. Remember that credit card interest rates are high, and if you are only paying the minimum every month, you’re going to fall victim to compound interest. Furthermore, should the interest rates increase, you’re going to have more difficulty lessening your debt.


Poor decision making due to lack of strategy

The truth is that not everyone is financially savvy, and it’s in your best interests to speak to a reputable business consultancy that has access to expert independent financial advisers who can help you develop a robust, feasible financial strategy. Your money should be strategically allocated to different budgets. 


Other causes of bankruptcy

Many indirect ways can cause financial distress and ultimately bankruptcy. These include a lack of fundamental marketing research and development. For example, you can spend millions of rand creating a product that simply doesn’t appeal to the market. There’s a marketing saying that you need to remember: There may be a gap in the market, but is there a market in the gap?

The bottom line is that keeping a business afloat and reaching your revenue growth goals is challenging; the reality of bankruptcy will always exist. However, with excellent leadership and the implementation of strategic preemptive tactics, it’s possible to safeguard your business and never have to declare bankruptcy. 


What Happens if I Die Without a Will?

Having a Will drawn up is an unnecessary expense; I don’t need one? The question you should be asking is can you afford to die without a will? In this article, we’ll unpack this question.


What is a Last Will and Testament?

A Last Will and Testament (often shortened to a Will) is a binding legal document that sets out your final wishes regarding the distribution of your assets (these can include but are not limited to property, capital, investments or vehicles.) Should you die intestate (without a valid Will), these wishes may not be fulfilled, and your estate will be distributed in terms of legislation regulating Intestate Succession or In terms of the intestate succession act 81 of 1987. Furthermore, this can make the resolution of your estate much more complex, costly and time-consuming for your nominated beneficiaries.


What if I die without a will? 

Dying without a will (legally called dying intestate) has numerous implications for the allocation of your assets and children.


If the deceased individual doesn’t have a Will, their wishes wouldn’t be considered. It’s likely that the children may be placed in foster care and possibly live with someone with whom they don’t know, or perhaps someone who the deceased didn’t trust. The children’s best interests should always be meticulously considered when a decision regarding guardianship needs to be made.


A living spouse (or spouses) and descendant(s): each spouse will inherit R250 000 or a child’s share, whichever is greater. The child(ren) will receive the balance of the estate, and if a child is deceased as well as a descendant(s), the child’s portion will go to their surviving spouse and dependants.

Assets and other earthly possessions

Your estate (the assets you owned at the time of death) will be distributed according to the Intestate Succession Act; it’s also known as the rules of intestate succession.

  • If you die without a Will but have relatives, the Succession Act will decide exactly who the beneficiaries will be. They can include a spouse, biological children, adopted children, parents or other blood relatives.
  • If you don’t have a valid will the intestate succession act is applicable. This Act states who inherits how much from your estate.  If you don’t have any family or if the Executor of your estate is unable to find any of your family members the money will be held in the Guardian’s fund and if there have still not been claims after 30 years, the money will only then be forfeited to the state. Also, if your closest family member is a minor, any money will also be held in the guardian’s fund until they reach adulthood.
  • If you have minors or adult beneficiaries who are mentally disabled, having a Will is imperative because minors and mentally disabled individuals do not have the capacity to inherit. In a will we can provide for a testamentary trust to be erected after the testator’s death. The minor/ disabled individuals share will be held in trust until such time that the beneficiaries are able to inherit.
  • An executor is an individual or institution that resolves your estate. You are allowed to nominate anyone to be an executor in your Will. If you die intestate, the master of the High Court will appoint an executor dative.

I’ve changed my mind; what do I need to have a will professionally drafted?

Circumstances that would necessitate a professionally drafted Will include:

  • You are married
  • You have children
  • You have a business or shares in a business
  • You are divorced
  • You are cohabiting with your life partner
  • You have children with special needs
  • You have foreign assets

How do I know if my Will is valid?

It’s vital to understand that specific steps need to be taken to ensure a will is valid. The requirements for drafting a valid will are contained in section 2(1)(a) of the Wills Act 7 of 1953. The requirements are not too difficult to understand; however, what may seem like a minor oversight to you, could invalidate the Will. Therefore, it’s in your best interests to contact a business consultancy that can provide you with immediate access to financial and legal experts who will meticulously check every facet of the Will.

The court has the authority to condone a Will that doesn’t comply with all the requirements. This is done so that any situations which may invalidate a Will are lessened. Still, it’s recommended that you follow the formalities. Litigation to condone a non-compliant Will, could drastically reduce the remaining value of an estate due to legal costs.

The credible resource hub, LexisNexis, provides an accurate, concise outline of the basic requirements of a valid will.

Fio Founder and CEO Ajay Wasserman comments on the importance of choosing the right person or institution to serve as the executor of your estate in your Will.

“The executor that you nominate inside your Will is the person that will be resolving your estate; it’s generally an attorney, accountant or qualified financial adviser that can assist you in resolving this estate. You can also have a family member as the executor of the estate. Still, to do that, you are putting a family member in the position to make emotional decisions while resolving your estate. So, I would not recommend that you have a family member as their executor of your estate because they will react emotionally to your death. They might make decisions when they resolve the estate that isn’t in the best interest of your wishes as well as your beneficiaries nominated in your Will.”

For more information about an executor, please read our article, Estate Planning: What Is An Executor Of An Estate?


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How To Achieve a Sustainable Retirement Income

Retirement should be a time of relaxation. You’ve dedicated many years of your life to your career and made your impact on your industry; the last thing you want to be worrying about constantly is money.

The truth is that not everyone can retire without having to draw an income from their retirement savings products such as retirement and living annuities. That’s why independent financial advisers will urge you to start saving for retirement as soon as possible. Having said that, if you need to draw an income, it’s imperative to understand the associated risks which could deplete your savings quicker than you think. The truth is that you may live longer than you initially anticipated; advancements in medicine and technology are contributing to longer lifespans, but inflation continues to erode buying power. So, it’s critical to have risk management measures in place to lessen the likelihood of financial instability.


Risk management measures you can put in place

There are specific measures that you can take to manage risk because, unfortunately, inflation and lifespan can’t be controlled. These include:

 These include:

  • Planning for an extended lifespan.
  • Structuring your portfolio for growth.
  • Ensuring you draw a sustainable income.

Let’s take an in-depth look at how these strategies can be used to mitigate financial risk at retirement.


Planning for an extended lifespan

As mentioned above, many people live longer lives primarily due to continuous advancements in medicine, technology, and lifestyle changes. It’s become more feasible you may live another 30+ years into your retirement and therefore outlive your savings.

In addition, the income on which you draw has to be adjusted for inflation annually so that it can be recognised in real terms. Inflation determines your income level for each of those years and the nominal investment returns you need to achieve a  sustainable income.

Unfortunately, it’s not practical to assume that inflation levels will remain reasonably low and stable. One of the best ways to mitigate this issue is to have a robust portfolio that can generate returns even during an unstable inflation environment.

It’s important to understand what a financial portfolio is before you read any further. A financial portfolio is basically a collection of financial investments (also known as asset classes). The main four asset classes include

  • Equities (stocks)
  • Fixed-income and debt (bonds)
  • Money market and cash equivalents such as closed-end funds and exchange-traded funds (ETFs).
  • Real estate and tangible assets

Diversify your portfolio for growth

You need to have a growth-centric structure for your portfolio. It’s essential to match your investment horizon to suit your needs. E.g. investing in an equity-only fund requires a minimum time horizon of five years. If you require immediate access to your money, it’s best to consider a money market or tax-free investment account.

 It should also be understood that asset classes that have the potential to bring higher returns can be more susceptible to market volatility. If you are unsure if you can withstand the risk, speak to a business consultancy with access to independent financial advisers. They will look at your financial situation from a holistic perspective and advise you what type of investments will allow you to achieve a sustainable income at retirement.


Ensure the level of income you draw is sustainable

Studies have shown that a drawdown of more than approximately 4% can negatively affect your income’s sustainability. Therefore, it’s recommended to draw a maintainable level of income and only increase it by inflation each year.


Alleviate risk by investing intelligently

Ensure you invest for real returns and actively manage risk. The application of these factors involves focusing on the prominence of total returns, keeping levelheaded during tough times and avoiding switching during short-term market fluctuations; this runs the risk of locking in losses if you withdraw from the fund. Studies have shown that portfolios need to allocate a minimum of 50% to growth assets to produce the real returns necessary for retirement.


So, how can you achieve this goal?

Maximise your total return irrespective of whether it’s income or capital return. Ensure that you actively manage downside risk, which is defined as ‘the possibility for an investment to experience a decline in value if market conditions change.’

If this is too unnerving, speak to an IFA. They will assist you in developing a diversified portfolio that manages risk allowing you to achieve a sustainable income at retirement.

How To Fix a Stagnating Sales Funnel

Are you finding that your sales figures are constantly decreasing? There likely is/are problems with your sales funnel, causing prospects to exit before they convert. Use the following tactics to examine and optimise each stage of the funnel.

If the sales funnel is a new concept for you, here’s a brief introduction.


Back to basics

Here is an excerpt from an article written last year that defines a sales funnel.

“The term sales funnel (also known as a conversion funnel) represents the route that a user will take on the path to purchase; the trail narrows as the user progresses through various stages. We’ll take you through each stage in detail to have a comprehensive understanding of the mechanism. There are a few different interpretations of the funnel, but for this article, we’ll be discussing the following stages.”

  • Awareness
  • Interest
  • Consideration
  • Intent
  • Evaluation
  • Purchase

Reasons you’re experiencing sales funnel issues

  • You’re not getting enough traffic

The bottom line is if your sales aren’t driving traffic to your website and/or mobile app, you can’t generate leads and make sales. It’s really that simple.

 Ways to fix the problem

  • Increase brand awareness

Awareness is the top stage of the funnel and therefore is the best place to start. Use social media to your advantage. If you haven’t already, set up appropriate social media platforms such as Facebook, Instagram and YouTube. Take an omnichannel approach and start posting content as soon as possible.

However, before you begin, make sure you’ve established a distinctive tone and voice to suit your brand and that will resonate with your audience. Invest in paid media advertising and run targeted ads on Google Display Network.

  • Follow SEO best practices

Search engine optimisation (SEO) practices strengthen your online visibility and help enhance your brand awareness efforts on search engine results pages (SERP). This is a vital tool needed to drive more traffic to your site.

For more information about these awareness-enhancing tactics, speak to a business consultancy that can provide you with immediate access to social media, copywriters and paid media specialists.

  • You’re not targeting the ideal audience

Ways to fix the problem

Who is your ideal audience? If you can’t answer this question, you need to go back to the drawing board. Define your brand’s purpose, vision and mission and apply it to your products and/or services. Conduct some market research to define your target audience. One of the best methods to start with is running online or email survey campaigns. There are numerous free platforms you can use, such as Google Forms and/or Mailchimp. Based on the results, you’ll find certain trends emerging, which will help set up an ideal audience framework.

Then, create a marketing strategy that focuses on targeting the specific audience segment that your research has identified. Once you reach this segment and start seeing an increase in traffic, you can branch out to other demographics.

  • Your UX and UI aren’t providing a favourable customer experience

Ways to fix the problem

  • User experience

Today, users expect to have a fluid journey through your website and/or mobile app. They should be able to find what they’re looking for, perform their desired actions and complete the transaction(s) as effortlessly as possible. If any of the sales funnel stages become a hassle, they will likely exit before converting.

Part of the ideal user experience is having a fun, easy to navigate user interface for your website and/or mobile app.

  • User interface

A user interface (UI) primarily drives the Interest, consideration and intent stages of the sales funnel. Prospects must be able to browse the site as they wish. Ensure that all your pages’ technical aspects are working. This includes but is not limited to page speed; this is a particularly vital touchpoint if you have an eCommerce business.

A well-functioning UI is also essential at the evaluation and purchase stages of the funnel. If there are any unnecessary detours at this point, it could cost you the sale.

A pertinent example is having difficulty applying a discount voucher code and paying at the purchase stage. You’re seconds away from making a sale; if this process doesn’t run smoothly, cart abandonment will likely occur. You need to make sure your payment portal is easy to use and it works optimally.

Think of the UX as the mechanics that make your website function and the UI as the interest—drawing website chassis. Both need to work in synergy to satisfy the customers’ needs. A faulty clutch or difficulty using the entertainment interface could break a 98% closed deal.  

  • You’re not nurturing leads

Ways to fix the problem

Are you following up with your customers who took part in the journey but didn’t convert? If not, start right now. One of the best ways to nurture leads is to send follow-up emails asking them about their experience and offering a reward to return to the site and complete their purchase. You can also use ad retargeting. We discussed this marketing method in a previous article. Here is an excerpt that defines retargeting.

“Retargeting typically refers to the placement of online ads or display ads targeting users who have visited and performed some interaction with your site without purchasing a product; basically, they have entered the sales cycle but haven’t made a purchase (converted). Their information can be captured by setting up a cookie in their browser.

Once complete, you can retarget your ads to them based on the interaction they previously performed. The ads are placed by third parties such as the Google Display Network or Facebook and, on other sites, the prospect visits.” Read the full article for more information about retargeting. People want to know that you care about them. Personalisation and connection are vital elements that need to be used to nurture leads.

Solution: Hit ‘restart’ to avoid a ‘force quit’

A detailed, agile marketing strategy needs to be in place outlining the necessary damage control procedures required to unclog each specific stage to ultimately avoid complete sales funnel stagnation. If none of the above methods assists in fixing the issues, it’s worth considering re-examining each stage at its source and restarting them. You may need to adjust your marketing strategy.

It’s likely to take time and effort, but if you don’t do anything, the funnel will shut down stage by stage and then it’s game over. 

Personal Finance Tips: You Can Save More Money

When was the last time you reviewed your long-term investments and/or savings products, such as a retirement or living annuity? It’s recommended that you review your financial portfolio annually or if you know that your personal circumstances will change relatively soon, such as getting married, having a child, saving for education or retirement, evaluate them twice a year.


Are you paying yourself enough money?

It may sound like a strange question to ask, but you’re essentially paying yourself over a specific time period by saving. You’re making contributions to suit your financial goals. You’re also building a financial cushion should unforeseen circumstances arise. One of the financial lessons we’ve learned from the pandemic is how important it is to have an emergency fund in place.

Saving more than you are currently may seem impossible, especially after you’ve taken monthly expenses into account; however, with a solid financial plan, the correct mindset and knowledge, you can save more than you think.


How to start saving more money

Let’s start with the basics. Build up a fund that can be used in case of financial emergencies. There’s no ‘ideal amount’; however, a rule of thumb is to have enough money to cover three to six months’ living expenses. It may take time to grow the fund sufficiently, but when it comes to saving, time is your friend because you will reap the rewards of compound interest.

Next, it’s essential to find the right financial vehicle for your emergency fund. You’re likely to need access to the money immediately; therefore, consider a money market or tax-free investment account. Each of these options has pros and cons. If you need more guidance, speak to a reputable business consultancy that can refer you to professional independent financial advisers. You will gain a much better understanding of which vehicle will help accomplish your target.

It’s easier to determine a certain amount if you:

  • Know what you’re saving for
  • Know how much money is needed
  • Have a realistic timeframe

Once you’ve figured it out, make a strong commitment to saving. Keep a level head, and don’t be tempted by emotional/impulsive spending. Ask yourself, do I really need that item? There’s a significant difference between needing and wanting something. For example, if you usually spend R1000 on clothes every month but sometimes buy an extra item for R1000, you’ve doubled your budget already. Why not put that R1000 into an emergency fund?

So, set up a budget that includes your fixed expenses, e.g. bond, vehicle and insurance payments. Then, look at the money that’s left; this is your variable expenditure, e.g. money you can spend. Decide how much money is needed vs wanted and put as much as you can into a savings account.   

To help you evaluate whether you are, or aren’t, paying yourself enough money, assess the following aspects of your financial life.

  • Your current financial situation

You need to assess your current financial situation. It will serve as a benchmark from which you decide on the best course of action to move forward. It’s essential to know so that you can draw up a financial plan to achieve realistic goals.

  • Your short, medium, and long-term goals

It’s also vital that you know what you want to achieve financially?’ It’s worth taking a bit of time to decide and set up your desired short, medium, and long-term goals. Based on that, it’s best to prioritise those goals so you have an accurate picture of how much money you’ll need to save to reach them.

  • Your cash flow

By having a regular income, money flows in and out of your bank account, but you can measure it in the form of a budget. It’s a good idea to set a budget, which you monitor and track. It can identify negative spending habits which you can cut and instead save.


By having a real overview of these areas of your life, you can ensure that you are paying yourself enough to secure a robust financial future all the way into retirement. It would be best if you didn’t rush; take it one month at a time. If you don’t know where to start, speak to a business consultancy that can give you access to experienced independent financial advisers (IFAs).

Please remember to be realistic about your goals because your financial future will, more than likely, rest heavily on the decisions you make today. 


Insights From Our CEO: Are My Products Priced Correctly?

Welcome to our exclusive series of personal – and business – wealth management insights from Ajay Wasserman, Founder and CEO of the Fio Group. He is an expert business and wealth consultant to business owners and entrepreneurs to create long-term sustainable wealth.

In this article, I would like to explain to you how to price your product(s). When it comes to developing or manufacturing a new product, you need to factor in your margins before sending the product to market to prevent selling at a loss. This may seem complex and daunting, especially to avid entrepreneurs starting out in their industry. So, let’s recap the basics first.


What is a profit-mark-up?

Cost price: This is the amount of money it costs for you to have the product(s) manufactured. You must take into account tooling, all materials and any other elements required to get the product ready for market.

Wholesale price: This is the price you charge to sell your product to retailers. You’ll add a profit mark-up to the cost price so that you are making a profit from the sale. The % mark-up usually varies depending on the industry.

Retail price: This is the price at which stores will sell your product. The retail company will add its own profit mark-up to the wholesale price.


Gross, Operating, and Net Profit Margin

Gross profit margin, operating profit margin, and net profit margin are the three main margin analysis measures that are used to analyse a business’s income and gauge whether they are making a profit or a loss.

I have consulted many businesses that when we go into the marginal details of the product pricing, we realised that they are currently selling their product at a loss; in other words, they are essentially paying the client to buy their product.

  • Gross profit margin

The gross profit margin is the broadest of profit margins because it shows the profit of all income that the business makes after considering the cost of goods (COGS).

COGS include only direct costs associated with manufacturing or producing the products. Formula:


COGS = Cost of Goods Sold

In a nutshell: the gross profit margin compares gross profit to total income, and the percentage reflects each rand that is retained as profit after paying for the cost of production.

  • Operational profit margin

All businesses have a plethora of indirect costs such as research and development, marketing campaign expenses, general and administrative expenses, and depreciation and remuneration. The operating profit margin is the percentage of each rand that remains after payment for all operating business expenses. Formula:


The operating profit margin is then calculated by dividing the operating profit by total income of the business. The operating profit figure indicated whether the business can manage all indirect costs, meaning that it shows the areas you’ve invested in to try and grow the business, e.g. marketing efforts.

In a nutshell: The operating profit margin shows whether or not a business can manage its direct expenses.

  • Net profit margin

Your net profit margin is calculated by analysing the last section of the income statement and the net earnings of a company after accounting for all expenses. Unlike gross profit margin, it takes into account interest and taxes. Formula:


In a nutshell: Net profit highlights whether or not a business can manage its interest and tax payments. Interest payments can take several varieties such as the interest a business pays stakeholders on debt for capital securities. Net profit margin also includes any interest earned from investments (short and long-term).


Product pricing best practices

When it comes to product pricing you have to, firstly, make sure the value of your product justifies the price of your product. It’s best to book a business consultation with a professional marketing company. They will be able to take an in-depth look at your audience

Secondly, always make sure that you are not running at a marginal loss (which you’ll have determined by calculating and analysing your three profit margin metrics.)

Ensure that your cost to develop the product support to manufacture the product is lower than the price that you are selling it for there has to be a margin for your business to survive that profit will help you grow the business.

When you’re working on the pricing of your product for your market make sure that they can afford it first of all second key that they see the value in your product and that they are willing to purchase the product because of the value they will get in return. Once you nail that, you might have to test the market still in the future to make sure that your product pricing is still correct.


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How AR Will Impact Marketing In 2021 And Beyond

Imagine you could furnish a home or office space in real-time on your own terms by using your smartphone? Pretty cool, right? Well, that technology already exists, and so does this scenario – welcome to augmented reality.

In a previous article, we discussed virtual reality’s impact on marketing, mainly how businesses could use the technology to create bespoke, immersive experiences for prospective customers allowing them to engage with the brand in a completely new way. “A Markets and Markets report estimates that AR will grow to be a $117.4 billion market by 2022.”

In this article, we’re going to discuss augmented reality and its influence on marketing. It’s proving to be a game-changing marketing tactic. Before we dive in, here’s a short introduction to augmented reality (AR).


What is augmented reality?

In a nutshell, augmented reality (AR) is reality enhanced by digital elements. It’s a technology that lets people superimpose digital content (images, sounds, text) in your real-life environment.

Unlike virtual reality, common AR applications are used on a smartphone. Users can open an AR app that can be downloaded from the App Store or Google Play Store, activate the smartphone’s camera, and view the world around them on the screen. An AR app enhances that on-screen world in numerous ways, such as:

  • Superimposing (also known as overlaying) images
  • Adding real-time directions
  • Adding filters

You’ve likely used an AR application before. When was the last time you used Uber Eats or Mr Delivery apps to buy a meal? When it gives you the option to track the driver in real-time, that’s AR. Instagram is another common AR application because it allows you to overlay images and add digital filters to your visual content.

Ana Javornik, PhD, a lecturer at Newcastle University Business School, wrote a fantastic article published in the Harvard Business Review. I’m going to be referencing a few of her points in the following section.


The problems businesses need to avoid

  • Does the AR app add value to your business?

After reading about a few AR campaign success stories, businesses may also be tempted to create an app, but the question you need to ask yourself is, ‘does it suit your audience, and can it have longevity?’ Javornik comments, “In order for the potential of AR to be realised, though, companies have to resist the urge to hastily create AR apps (that risk appearing gimmicky), and instead focus on better understanding how consumers will interact with the technology.”

An app that is seen as a gimmick may draw initial attention, but it will lose its novelty and fizzle out of audiences’ zeitgeist sooner or later.

  • It may require a lot of research and development

If you really believe that your business’s app can enhance customer experience, leading to a sales surge and financial business growth, make sure you put in the necessary research and development (R&D) hours as well as collaboration with AR experts. Javornik says.

“I have found that designing and implementing valuable AR apps requires the following:

  • A better idea of how consumers would use such technology;
  • More collaboration among computer scientists, designers, and marketers; and
  • A strategy for integrating the applications into the existing consumer journey.”

 Successful and failed AR apps


Example of a failed AR app: Google Glass

Google Glass is a wearable computer featuring a head-mounted display in the form of eyeglasses. The Google glasses function as a hands-free smartphone, letting users access the mobile internet browser, camera, maps, calendar, and other apps by voice commands. Studies have shown that people don’t want every aspect of their reality augmented; that’s why Google Glass failed.

© Photograph: John Minchillo

 Failed AR app: Ray-Ban Virtual Mirror

Way back in 2008, the iconic Italian eyewear brand launched an app called Ray-Ban Virtual Mirror, which was 3D software that could be downloaded and connected to a webcam. Once connected, users could superimpose different Ray-Ban glasses models in their face to see if they suited them. While it was a cool idea, many people didn’t feel the renderings were accurate enough, and the innovation died. It could be argued that the failure of this AR app was subject to the limitations of the technology 13 years ago.

Example of a successful AR app: IKEA Place


IKEA, using Apple’s ARKittech, created an AR app called IKEA Place. It allows customers looking to furnish or re-furnish an office space or home to choose from thousands of IKEA’s products and set them up in the environment around them. So, you can literally stand in the space you want to furnish and place furniture in the various areas to see if they suit your needs.


The solution for businesses

“Marketers should remember that AR is not about creating a completely new reality; it’s about enhancing what already exists. When the virtual is well fitted with the physical and interacts with it, that’s when AR magic happens,” says Javornik.

There is no doubt that AR is lucrative marketing technology. “A Citi GPS report projects AR’s billion-dollar annual revenues will further increase to $692 billion by 2025. AR will be booming and offers great opportunities for organisations to expand and enhance marketing activities.”

 The reality is that ‘traditional’ marketing roles need to be agile enough to adapt and understand the purpose of the technology and leverage AR to leverage their brand to achieve their bottom-line.

Estate Planning: What Is An Executor Of An Estate?

Welcome to our exclusive series of personal – and business – wealth management insights from Ajay Wasserman, Founder and CEO of the Fio Group. He is an expert business and wealth consultant to business owners and entrepreneurs to create long-term sustainable wealth.

In this article, I would like to speak to you about the role an executor plays in the resolution of your estate.

What is an executor?

An executor is an individual or institution that resolves your estate after you have passed away. You can nominate anybody to be executor; it’s typically somebody close to you, a financial or legal professional. It’s important to note that whomever you choose has a right to charge a fee to resolve your estate. The South African Tax Act states that the executor fee can be up to 3.5% of your estate value exclusive of VAT.  This equates to approximately 3.99% of your estate’s asset value.


Duties of an executor

Here is a list of the duties an executor is obligated to undertake.

  • The nominated executor needs to meet with the deceased’s family to acquire all the appropriate information and documentation required, e.g. the valid death certificate and a list of the deceased’s assets and liabilities
  • The deceased estate has to be reported to the Master of the High Court in the area in which the deceased resided.
  • The executor must notify all creditors (persons or entities to whom the deceased owed money) to inform them of the death. The notice will also ask creditors to submit their claims against the deceased estate within a period of not less than 30 days or more than three months after the notice is published in the Government Gazette and a local newspaper.
  • All existing bank accounts of the deceased must be closed. A completely separate bank account must be opened in which all money that forms part of the deceased estate will be kept.

The executor needs to determine whether the deceased estate has enough assets to pay for the accumulated liabilities. The executor needs to consider selling some of the assets that form part of the deceased estate should there not be enough money to pay some – or all – of the liabilities.

  • The executor is responsible for drafting accounts that must be advertised for the public to inspect. These accounts need to then be lodged at the offices of the Master of the High Court. The accounts will outline the assets and liabilities and how the deceased estate will be divided and distributed between nominated beneficiaries.
  • The executor needs to pay the creditors and distribute the deceased estate after the Master has approved the accounts of the High Court.


Should I nominate a family member, legal or financial professional?

If you nominate a family member as an executor who isn’t a legal or financial professional, it’s unlikely that they will know how to perform the task. He/she will also be emotional due to your passing. Therefore, it makes sense to nominate a third party who can oversee the estate resolution objectively.

Remember, they will charge an executor fee of 3.5%. For example, if you have an estate valued at R1 million, you will easily have to pay up to R40,000. This is not even taking into consideration property transfer fees, estate duty liabilities or any other things that you might have to pay into the estate.

So, make sure you understand and agree to this expense before you sign your Will. Your lawyer or financial institution that draws up your Will can recommend a fixed executor fee if you prefer?


Fees and other costs that may need to be paid into an estate

There are numerous fees that need to be paid to resolve an estate. Here is a list of some lesser-known expenses which vary depending on the size of the estate. Below is a table taken from an article published by Business Tech called The hidden costs when you die in South Africa of approximate fees for an estate valued at R1 million.

So, it’s easy to see how the expenses can pile up, especially if your estate is valued at significantly more than R1 million.


Key takeaways

  • An executor can be an individual or institution that resolves your estate after you have passed away.
  • The South African Tax Act states that the executor fee can be up to 3.5% of your estate value exclusive of VAT.
  • You have the choice to nominate anybody to be the executor of your estate; it’s typically somebody close to you, a financial or legal professional.
  • Make sure that you understand all the expenses associated with estate resolution because it can become expensive.
  • Creditors have 30 days or no more than three months to submit their claim(s) against the deceased estate.

Connect with Ajay

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Beginner OR Advanced? What You Need To Know About Investment Management

Are you thinking about starting to invest your money? Many potential investors are tentative to pay for financial advice; perhaps you received some bad advice in the past? This is entirely understandable, but the reality is, can you afford not to seek professional advice about your investments? Not everyone has the experience and financial savvy to manage their own investment portfolios. If you already have an investment portfolio, when was the last time it was evaluated?

For first-time investors, please find explanations about investment management below. It’s worth reading as a refresher course for those of you who have investments, but you can scroll down to the investment evaluation section if you’d prefer.

What is investment management?

Investment management is the creation and maintenance of a financial portfolio. It can consist of various types of investments such as annuities, unit trusts, property and offshore investments.

Investment management also includes following and/or adapting an investment strategy, buying and selling investments, and managing the portfolio’s asset allocation. The different types of asset classes in which you can invest are:

  • Stock or equities
  • Bonds or other fixed-income investments
  • Cash or cash equivalents, such as money market funds
  • Real estate or other tangible assets
  • Futures and other financial derivatives

What are investment managers?

An investment manager is an individual (or company) that manages an investment portfolio for you. Investment managers develop an investment strategy to meet clients’ financial objectives and implement it to determine how to divide the portfolio among the different types of asset classes, such as stocks and bonds – the percentage of asset exposure will depend on the fund in which you’ve chosen to invest. The manager buys and sells those investments for you and monitors the portfolio’s overall performance.

How can I open an investment account?

Step one: Define your financial goals

Before you open an investment account, make sure that all your financial goals are defined. E.g. What is the purpose for investing, what’s your risk appetite and what’s your time horizon – are you saving for your child’s education, your retirement or an emergency fund? The answers to these questions will determine which type of investment will suit your needs.

For example, if you’re saving for retirement, consider a retirement annuity and complement it with a tax-free investment account. You have peace of mind that contributions to your RA will reap the rewards of compound interest, and a tax-free investment account allows you to save a tax-free amount of up to R500,000 in your lifetime. If you’re saving for an emergency fund, you will need the money to be easily accessible. In this case, consider investing in a Money Market – the funds earn interest and can be withdrawn immediately.

Step two: Speak to an independent financial adviser

Does all the above mentioned information sound overwhelming? No problem. Speak to an independent financial adviser. They are experts at looking at your financial situation from a holistic perspective and will help you draw up a financial strategy tailored to suit your needs.


Do you already have investments? Examine their performance to make sure they are meeting your objectives

Once you have an investment portfolio, you must examine your investments’ performance to ensure they align with your financial strategy. It’s suggested that you evaluate your portfolio annually to have a well-rounded view of its performance; based on this, review your decisions and think about making revisions if they no longer support your financial goals.

Here are three tips to help you determine the performance of your investments.

Evaluate your financial goals

Your financial objectives will change alongside personal circumstances. Perhaps you’re planning to marry and/or have a child. In these cases, you may need to access funds for the wedding and/or want to start saving for your child’s education. These personal milestones are the perfect time to re-evaluate your goals.

Compare your personal benchmarks with investment performance

Whenever looking at your investment portfolio, ask the question, ‘what are my financial goals?’ Your financial objectives define your personal benchmarks. Investments also have performance benchmarks, so you need to decide whether both are in sync with each other.

Let’s use unit trusts as an example.

Each type of unit trust (e.g. equity fund or balanced fund) has a benchmark that lets you judge how your investment performs against the intentional goal. Unit trusts are investment vehicles that require commitment over the long term; funds carry differing degrees of risk, e.g. an equity fund has the potential for higher returns in the long term but is more susceptible to market fluctuation. Therefore, short- term performance dips are more likely than those invested in a lower-risk fund such as a balanced fund. So, instead, assess your investments over a time horizon that is suitable for the specific unit trust and your financial goal.


Think logically, not emotionally

When it comes to investing, one of your best assets is to keep a level head and avoid impulsive decisions such as panic caused by short-term underperformance of your investment. It’s important to note that investment fluctuation is not a risk in itself; it exists on paper. The real loss of your investment only becomes a reality if you made a drastic decision such as withdrawing your investment because you were emotionally overwhelmed at the prospect of It losing its value.

As mentioned earlier, if you require any assistance in making financial decisions, speak to an independent financial adviser (IFA). It’s their job to guide you along your journey of financial wellbeing.

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