MyBusiness September 2011 by CommStrat

SENATOR NICK SHERRY SAYS DON’T FEAR THE CARBON TAX The magazine for ambitious business owners

SEPTEMBER 2011

Profits with purpose

The new community entrepreneurs

MasterChef

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Trust funds How they protect your wealth

NBN connection guide • Herb farm’s software crop • Cashflow tips

SEPTEMBER 2011

www.mybusiness.com.au

CONTENTS Cover Story

Regulars

PAGE 12

News and views Brad Sugars Gadget Guide BEC news By the numbers

Sydney Web incubator Pollenizer has helped businesses to raise $100 million. Founder Mick Liubisnkas shares the team’s approach to building business in this My Business exclusive.

2 8 50 70 72

Features GUEST COLUMN Nick Sherry

The hard-working tourist

Federal Small Business Minister Senator Nick Sherry explains the carbon tax.

FINANCE Trust in trusts

Trust funds are a valuable tool that can help you to protect personal wealth.

PAGE 16

Stop growth killing your business

Matthias Hammer’s eco-tourism venture, Biosphere Expeditions, is showing the world that travel businesses can do more than just employ locals.

Too much growth can starve your business of cash. Get back in control with these tips.

MARKETING Startup buzz

Learn how to create great buzz for your startup in Natalie Apostolou’s roundup of expert marketing advice.

BUSINESS TECHNOLOGY Linking up

Learn how to network your office so you can share files and resources with your team – and the world. Australian Fresh Leaf Herbs has grown to become a $4million company in just four years. It’s secret? Re-working supply chains with clever software.

A new wave of businesses is happily making profits, but putting that cash to work to support a cause rather than enriching founders or investors.

The owners of Rockhampton’s Hairhouse Warehouse franchise have found ways to grow their business independently.

Entries for the 2011 ActionCOACH My Business Awards are in! Read on to learn what you can expect as the judging process unfolds.

Keeping tabs

Technology Editor Lia Timson rounds up the latest tablet computers and explains how they can add value to your business.

EXPERTS Robyn Anderson 60 Sheralyn Guy 61 Donna Stone 62 Phil Lee 63 Brian Walker 64 Tranh Nguyen 65 Sue Hirst 66 Ivan Misner 68 Tony Gattari 69 1

EDITOR’SLETTER NEWS&VIEWS We try to avoid clichés at My Business. We figure you’ve been told to ‘delight customers with passion in an authentic online voice that engages with them so you can stop sweating the small stuff and work on, not in, your business and avoid just buying yourself a job’ plenty of times. Hence my disquiet at the topic of this month’s letter — the inevitability of change. As I write this, the whole world is changing. Stock markets are behaving like bungee jumpers and economic orthodoxies are looking queasy. My Business is changing, too. To be honest, I ran out of funny a long time ago on our ‘Back of the envelope’ page. We’ve replaced it with a new feature called ‘By the numbers’, which brings you interesting bits from the many, many surveys the magazine is sent each month.

EDITOR Simon Sharwood 0414 373 726 mybusinesseditor@mybusiness .com.au

NATIONAL COMMERCIAL

ART DIRECTOR Tim Hartridge

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DIRECTOR Tony May 02 8923 8001

EVENT Coordinator Simone Benson 02 8923 8003 simone.benson@commstrat.com.au SECTION EDITORS

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Marketing - Natalie Apostolou

PRODUCTION MANAGER Russell Montgomery

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SEPT 2011

NEWS

We’ve also had some changes in personnel. Tiffany Hutton has decided to step down from her position as Finance Editor. We’ll miss her, but have started working with a roster of finance experts, so the magazine will continue to help you navigate your balance sheet. Michele Gamble, one of our Experts, has also decided to move on. Michele’s contribution to the magazine spanned several years and always offered wholehearted and practical advice. Beyond those changes, we’re working on some other big things for the magazine. I cannot tell you about them just yet, but let’s just say the things we are working on aren’t inevitable. But they may be intriguing. Simon Sharwood Editor, My Business

My Business teams with Bargains 4 Business

y Business has formed a partnership with a new group buying site, Bargains 4 Business. The partnership will see My Business offer a free digital subscription to the magazine for anyone who signs up for a deal with Bargains 4 Business. “Bargains 4 Business is a new take on the group buying and daily deals model,” said Director Mikel Kew. “Instead of offering consumers deals on beauty products, restaurants and fitness services, Bargains 4 Business offers

daily deals that are specifically for business customers. Rather than wading through an inbox full of the same old consumer deals, our subscribers will be shown only great offers on business products and services that they can use specifically for their business.” “We are committed to featuring deals that are great for both the customer and the merchant,” Kew added. “We will work with merchants to carefully structure a deal that is viable for their business and which will encourage additional sales or an ongoing customer relationship.” Bargains 4 Business will also send a further promotional email to all customers who redeem their vouchers with a merchant, offering a further discount on additional products or services to provide a further incentive to keep coming back. To receive offers from Bargains 4 Business, subscribe to the My Business e-newsletter at http://mybusiness.com.au/ subscribe-enewsletter or visit www.bargains4business.com.au

NEWS&VIEWS NEWS&ViEWS&VIEWS ViEWS&VIEWS 4G mobiles – fab or flop?

elstra has announced a new 4th generation (4G) mobile network. Faster download speeds are the headline attraction, as the 4G kit Telstra has chosen can hum along at 100 megabits per second (Mbps). That’s as fast as the wired connection on many older wired office networks and considerably faster than the 12 Mbps advanced as the minimum speed for the NBN. It’s also more than double the 42 Mbps top speed available on Telstra’s NextG today. That’s the good news. The less exciting news is that 4G will only work in Sydney, Melbourne and Brisbane, and only, as Telstra has been careful to point out, “within 5km from the GPO”. Telstra has also been very careful not to make any claims about the speed you’ll experience. To use a 4G network you’ll need a new modem for your computer and Telstra has announced one (pictured below) at “$0 upfront on the $49 Telstra Mobile Broadband Standard Plan over 24 months (minimum total cost $1,176) with 7GB included data”.

Should you care? There’s no reason to queue all night to get your hands on 4G equipment, for a few reasons. One is that 4G won’t be exempt from the real-world performance of wireless networks, so there will almost certainly be slow days, dropouts and general weirdness. Because 4G won’t be exempt from those phenomena, you’ll almost certainly get a slower connection in the very limited area the carrier will initially cover. Another is that Telstra will keep its 3G kit going for a good long while yet. It will probably be cheaper and on many occasions will get close to 4G speeds, so if you don’t need blistering connections, you can save a few bucks. A third is that what Telstra is calling 4G doesn’t achieve the speeds that telecommunications nerds say makes for a real 4G network. The international bodies who run this stuff say real 4G will be 10 times faster again — one gigabit per second — than the stuff Telstra has announced. (For those who like acronyms, the stuff Telstra is rolling out uses the 3GPP Long Term Evolution standard. The really fast stuff is called LTE Advanced.) So what’s the big deal? It’s a grand achievement for Telstra to be confident it can throw the switch on an upgrade. But for you and I, the 4G network’s currently so small and the real-world speed boost will likely be elusive. So mark 4G down as the march of progress in action, rather than an upgrade you have to have. Telstra’s 4G wireless broadband modem

AAP Image/Tracey Nearmy

Fashion industry stumbles

he future looks ugly for Australia’s fashion industry, according to new data from business information research firm IBISWorld, which predicts anaemic growth of just 1.6 per cent between 2012 and 2017 for fashion retailers, and a 2.5 percent contraction for manufacturers. “Consumers have become accustomed to price reductions and now expect to buy items at sale prices — whatever the time of year. They are also becoming increasingly savvy in the use of price-comparison Websites, as well as buying items directly online from both domestic and international retailers,” said IBISWorld General Manager (Australia), Karen Dobie. Dobie says retailers are cutting costs so they can meet buyers’ price expectations. “This year, Myer will further decrease wholesale purchases by lifting its global fashion outsourcing budget to $200 million and increasing direct trade with manufacturers through its two global outsourcing offices in Shanghai and Hong Kong,” she said. “International manufacturers face significantly cheaper operational costs than are possible in Australia, making it cheaper for retailers to source items offshore. For many of Australia’s well-known brands, such as Pacific Brands, the solution to keeping costs low has been to move their manufacturing operations offshore.” Complicating matters further are increases in external costs. “Global cotton prices rose by 65 per cent last year and are expected to increase by another 70 per cent in 2011 due to tight supply conditions and increased demand to reach record levels. At the same time, average wages in the Chinese apparel manufacturing sector have risen by 42 per cent in just five years. So while the high Australian dollar will provide some protection to retailers’ profit margins, it will also encourage retailers to source more clothing from overseas, forcing more clothing manufacturers to close or to move offshore to competitive low-cost countries such as Vietnam, Pakistan and India.” 3

IEWS Q&A – Federal Small Business NEWS Minister Nick Sherry M In mid-August, My Business editor Simon Sharwood interviewed Federal Small Business Minister Nick Sherry. Here’s a transcript of the interview.

y Business (MB): Minister, the Productivity Commission’s draft report unto the retail industry has recommended leaving the GST import threshold at $1,000. How do you think retailers will respond to that? Minister Sherry: I think the critical issue is that the report identified the GST threshold as just one of a significant number of issues in retail trading. It also raises the practical issue of how to collect extra GST. So while the Commission said GST should be a level playing field, the practical challenge is how to collect GST in a cost-effective way. The final report is due in November, so industry has time to respond with specific ideas.

“I have raised an eyebrow when I have seen some credit card surcharges.” MB: Readers have told My Business that they feel the Carbon Tax should have included specific assistance measures for small businesses. Minister Sherry: I think it is important to recognise that small business will not be directly affected by the Carbon Tax. The price impact on energy from the tax and the emissions trading scheme is small, and it is an indirect impact. Nevertheless, there are a couple of specific measures to support small businesse. One is that we are increasing asset investment write-offs to $6,500. There are also funds for industry organisations to assist with energy efficiency. MB: Businesses we’ve spoken to worry about the increase in energy prices. Last issue, we spoke to a baker and energy is a very substantial input for that and other industries. Minister Sherry: There is a direct impact via energy prices, but the other price impacts are not significant. People think the world is going to end on July 1, 2012 when the tax comes in. It will not. The average energy price increase is 10 per cent. Some businesses do have high energy inputs, but the impact is not going to be the end of the world. MB: How do you think recent international events like the threat of US default, troubles in Europe and stock market turbulence impact Australian small business? Minister Sherry: There is no doubt that international events 4

SEPT 2011

are impacting on consumer confidence. When you have headline news about financial disasters and instability in Europe and the US and it appears day after day, it does affect confidence. I live in Devonport — a small regional city — and even people there ask me about what is going on in the world. We need to acknowledge we are not immune, but we must also keep repeating that Australia is in a different set of circumstances compared to America and Europe.

MB: What’s your view on retailers’ use of credit card surcharges? Minister Sherry: I won’t make any comment beyond the fact that the Reserve Bank is inquiring into it. But I acknowledge that there is a small number of businesses that are charging what is seen to be excessive surcharges. I experience it first-hand in the course of my work and I have raised an eyebrow when I have seen some surcharges, but it is up to people to make submissions to the Reserve Bank. MB: How’s the Small Business Superannuation Clearing House going? The Opposition has been very critical of it and the low take-up. Minister Sherry: Five-and-a-half thousand employers are now in the Super Clearing House and that’s in just the first year of the service. It covers 38,000 employees and there are now $70 million in payments made through the system — 98 per cent of the small businesses are either satisfied or extremely satisfied with the service and take-up is accelerating with more and more publicity. So there has been an acceleration even though there has been no direct advertising, but there will be mail-outs in the next three months to inform people of the service. The vast bulk of small businesses — certainly in the hundreds of thousands of businesses — will receive a letter. The feedback from those that have used it has been very, very positive, so getting the message out is the next phase.

“Some businesses do have high energy inputs, but the impact of the Carbon Tax is not going to be the end of the world.”

NEWS&VIEWS

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&VIEWS NEWS&VIEWS Startup of the Month: NEWS&VIEWS Backload moving W hen you move interstate, there’s every chance the truck you hire to move your precious goods to your new home will return without any cargo. The cost of that revenue-free return journey is built into the price you pay a removalist. Transport companies have a bit of a grapevine going, so they know when a truck is making an empty journey and ‘backload’ freight at a very good price, because they’re grateful to have any paying cargo. Ordinary folks find it nearly impossible to find empty trucks willing to backload, and that’s where our Startup of the Month for September comes in. Backload Moving connects people who need to ship their furniture with transport companies. If you are moving, you can list your move on the company’s Website. Removalists can access the listings and the two parties

State franchise bills refuse to die

tate-based franchise laws refuse to die, despite ongoing opposition from the Franchise Council of Australia. South Australia is leading the push, with Small Business Minister Tom Koutsantonis recently introducing a plan to give the State a Small Business Commissioner and new laws that will give small businesses better protection. “We understand that for too long small businesses, franchisees and tenants have felt powerless when dealing with unfair practices of franchisors, larger businesses or large-scale landlords,” Koutsantonis said. “These are the mum and dad and family businesses which form the basis of our economy, and this legislation will give them a voice, a champion to help them through tough times, disputes and compliance issues.” The legislation was praised by Tony Piccolo, a South Australian MP who championed franchise law reform in the State. Meanwhile, West Australian State Member of Parliament Peter Abetz is pressing ahead with a bill to give the State its own franchising laws, even though his own party has opposed the legislation. Abetz says the franchise industry includes some “rogue franchisors” who exploit franchisees and has put forward a private member’s bill to regulate the industry in ways that will make it harder for rogues. The Franchise Council of Australia has opposed the bill and says it is happy with the current national regulations covering franchising. The Council has also said it opposes Statebased legislation, as different laws increase complexity for franchisors. The West Australian Liberal Party also decided not to support the bill, but did allow the formation of a parliamentary committee to investigate the industry. That committee’s report cast doubt on whether rogue franchisors are a real problem, but Abetz nonetheless introduced his bill to State Parliament. The bill has since been read a second time, a precursor to a vote being taken. Abetz believes the Bill may pass, as the West Australian Parliament currently has 26 Labor members and four independents. Their combined numbers exceed the 24 Liberal and five National members in the Legislative Assembly, and Abetz hopes that all non-government members will support the Bill. 6

SEPT 2011

get together to arrange a well-priced move. Sitting in the middle is Backload Moving, which collects a commission from the removalist for having found it some work. Founder Sue Winters is married to a removalist and used her knowledge of the industry to design the company, which in just under a year has gone national. “The financial climate hit my family with hard times, and by late last year, I decided to turn my knowledge of the furniture removal industry into something positive,” she told My Business. “We are now achieving solid growth, and I am getting to know who the trusted carriers are in Australia. From what is essentially a simple idea, I have moved my knowledge and skills to establishing a successful online presence.” You can find Backload Moving at www.backloadmoving.com.au

Facebook Check-In Deals arrive in Australia

acebook’s location-based marketing tool, Check-In Deals, has arrived in Australia.The product uses the Places feature found in Facebook’s smartphone apps, which lets users put the GPS units in their phones to work by telling their friends where they are in the world. Facebook offers a list of nearby locations, including businesses, where its users can ‘check in’. If you choose to offer a Check-In deal, it will appear in the list of businesses in Facebook’s app. The service launched in mid-August 2011, with Westfield the first to take advantage of the new marketing tactic with an offer that will see discounts of up to 30 per cent offered at Angus & Coote and Cotton On stores. The offers will be sent to users only after they check in from a Westfield property. “Retail, and particularly the way we can now target shoppers with special deals and discounts, has changed dramatically over the past decade. With tools such as Facebook Check-In Deals we’re now able to communicate to our shoppers in relevant and localised ways,” said Westfield’s General Manager of Marketing, John Batistich. Facebook has published a guide to Check-In Deals at https://www. facebook.com/deals/checkin/business/

IEWS

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NEWS&VIEWS BRAD SUGARS Of all the business development strategies I’ve come across, leverage is the best.

Brad Sugars is Founder and Chairman of ActionCOACH, the world’s number one business coaching firm. 8

SEPT 2011

How to successfully “leverage” your business

hen most people think of leverage and adding leverage to their business, they immediately think of using debt. I like to use the term another way — ‘dividing to multiply’, or even more simply, getting ‘ever more with ever less’. In my mind, leverage is all about doing more or getting more with ever smaller investments of my own resources, be it time, effort or money. In short, it’s about working ‘neck up’ (meaning from your knowledge and skill set) instead of the ‘neck down’ (tasks, activities and/or physical labour). Another way to look at this is how can you find ways in your business to ‘do the work once and get paid forever’? Does that sound too hard? It isn’t, when you really think about it, or look at the current tasks and activities you are currently doing in a new way. For example, here’s a list of things you are probably doing in your company today that you could greatly leverage at very little cost (with a few tweaks) and which would bring you a lot more returns both in terms of ROI (return on investment) and RORI (return on resources invested): • Hiring and training new employees — Whenever you hire and train a new employee, you are leveraging your company’s vision, mission and culture, as well as your company’s unique knowledge and skill sets. Knowing this, how can you improve your systems for hiring and training to truly allow your new hires to multiply your efforts — and your bottom-line? • Getting more repeat business — Whenever you get a repeat purchase, you lower the original costs of acquisition for that customer. Get enough repeat business and that customer becomes very profitable. Get a new referral from that customer and you’ve lowered your new customer acquisition cost for that new customer to … zero! Systemising your company’s scripts, improving your service experience and making sure you reward your best customers for their referrals can not only leverage your existing marketing efforts, but can ultimately reduce the long-term costs of your campaigns. That’s because you will be

relying on referrals and word-of-mouth versus paid ads. • Testing and measuring to either kill or keep your advertising campaigns — Can one single ad make or break a business? We can debate that one, but a single tested ad or campaign that’s proven to be effective can be the basis of your business growth for years. Plus, how valuable would it be to have a system in place that forces you to stick with a focused message that really resonates with your target audience, versus spending resources every few months to create new campaigns? What are some other ways you can apply the concept of leverage to your company? Here are a few I like to recommend: • Franchise your business model; • Develop a new product or system for your business; • License a new product or system to others to generate new income streams; • Build a network of distributors for your product or service; and • Use multiple platforms (conventional, online, social media) for company communication. In short, leverage is creating something meaningful by effectively working with other people, systems, and processes to save time and energy, which can also make you more money. The key to all of this is systems. It’s also about thinking of ways of using existing resources in different ways. Because of this, I would venture to say that of all the great business development strategies I’ve come across, leverage, when used properly, is one of the best and most effective you can adopt. It’s also the key to great and sustained wealth. That said, your mind — and your business and financial education — is your greatest lever of all. Start using that lever to move your business ‘neck up’. You’ll soon discover that once you can find ways to actually ‘do the work once and get paid forever’, not only will you run a better and more profitable business (or businesses), but you’ll have the extra time and energy to enjoy your increased success.

NEWS&VIEWS NIck Sherry The Government’s Clean Energy Future plan does adds no new red tape for small business.

Nick Sherry is Federal Small Business Minister. For more information on the Government's plan for a clean energy future, visit www.cleanenergyfuture.gov.au 10

SEPT 2011

Small business has a clean energy future

mall businesses will play a vital role in building Australia’s clean energy future. We have a strong, vibrant small business sector, but we know running a small business can be tough, and understand that making ends meet can be difficult. We also recognise that time and resources are scarce and chances to focus on issues outside of core business are limited. The Government will support small business in making the transition to Australia’s low-pollution economy of the future and our Clean Energy Future plan adds no new red tape for small business. They won't have to count or monitor their carbon pollution or electricity use or fill in a single form as a result of the introduction of a price on pollution. Only the big polluters will pay the carbon price. We know that some of the big polluters may choose to pass these costs through to small businesses, including through electricity bills, but these costs are expected to be modest for most. Overall, the carbon price will see prices rise by less than one per cent — less than a cent for every dollar spent. This is less than the impact from things we take for granted, like exchange rate movements or international oil price fluctuations. Most small businesses are expected to pass these costs on to their customers, which is why the Government’s plan includes a comprehensive package of household assistance. Assistance under the Government’s plan is permanent and will increase, meaning millions of households will be better off — even after any costs passed on to them, including by small businesses. Under the Clean Energy Future plan, the instant asset write-off will rise to $6,500 for small businesses with turnover under $2 million a year. This will free up cashflow and assist them to grow and invest in new equipment, providing an immediate income tax deduction for the cost of eligible assets. The Government is also establishing the $40 million Energy Efficiency Information Grants program to support small to medium businesses and community organisations in taking practical measures to reduce their energy costs. This program will be delivered through grants to industry associations and non-government organisations with established relationships with small businesses. A further $5 million will

be injected over four years to provide clean technology advice to small businesses. These initiatives are in addition to work we are already undertaking in partnership with small business, as we make the transition to a low-pollution economy. Clean Business Australia is investing $240 million in small and medium businesses (as well as owners of commercial office buildings) to improve energy and water efficiency and increase sustainability, with a focus on productivity and innovation. This program supports the development of new technologies and services responding to climate change. We are committed to leaving a better planet and economy for the next generation and providing small business with many new opportunities to share in the benefits of Australia’s clean energy future. For example, renewable energy is expected to grow to 40 per cent of Australia’s electricity supply by 2050, up from 10 per cent currently. This will create spin-off opportunities for a whole range of entrepreneurs and small business owners. Small business can also choose to become carbon neutral or sell carbon neutral products and services. This can open new marketing and sales opportunities and reduce costs if energy efficiency measures are taken and resource use is reduced. We have also established Low Carbon Australia to administer the Carbon Neutral Program and provide Government certification to products and services that are verified as carbon neutral. The Carbon Neutral Program encourages businesses to measure their carbon footprint, reduce their emissions where possible, and offset any remaining emissions. Putting Australia on the path to our clean energy future is a historic reform to our economy which will cut pollution and drive innovation. By taking action now, we will cut 160 million tonnes of pollution in 2020 — the equivalent of taking 45 million cars off our roads. Australia’s economy will continue to grow strongly as we cut pollution to reduce the risks of dangerous climate change with an extra 1.6 million new jobs projected to be created by 2020. It is not too late to reduce the risks of climate change, but it is vital that we act now. Tackling climate change just makes sense — for small business, and for all Australians.

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PEOPLE IN BUSINESS

Meet the Pollenizers Sydney Web startup incubator Pollenizer has secured more than $100 million in funding and successful exists for companies it advises. STORY BY SIMON SHARWOOD

“A

business partnership is like a marriage,” says Mick Liubinskas. “But without the sex. And with more pressure.” Liubinskas should know – he’s in 15 partnerships at present and is trying to consummate them all with successful exists for the entrepreneurs involved, as this is the goal of Pollenizer, the business incubation company he founded with partner Phil Morle in 2008. The Pollenizer story starts in 2002 inside one of Australia’s most controversial businesses – Sharman Networks, owner of online file distribution service Kazaa. Widely reviled as a platform for piracy, Kazaa fought a protracted and ultimately futile legal battle with the copyright cops. Liubsinskas says the company had a legitimate content distribution business and proved it by becoming a player in the paid distribution of Bollywood movies. But as Sharman Networks unravelled, Liubsinskas and Morle began to contemplate their options. “Phil was hired to run product engineering and I was hired to do run marketing and business development. Phil is an ex theatre director and me as a frustrated actor worked well together. Kazaa was a ridiculously crazy tornado of a business and we learned a lot.”

SEPT 2011

PEOPLE IN BUSINESS

Just being an advisor is not enough for me. I don’t just want to get my hands dirty. I want to get mud all over me from head to toe. I want to be filthy dirty in the trenches.” – Mick Liubinskas

(Left to right) Pollenizers Tony Faure, Phil Morle and Mick Liubinskas

Once the legal action got nasty, Liubinskas and Morle bailed, running startups around the world before returning to Australia. Liubinskas found himself helping social media startup Tangler, and Morle was doing similar work. The pair reconnected, asked themselves how they could help Australian Web startups realise their potential, saw value in a partnership, and each put $500 into a bank account to start the company. The pair considered adopting models from overseas incubators, including the very successful San Francisco-based Y Combinator and its model of funding and mentoring startups for three months. As their discussions progressed, the pair decided they wanted a deeper involvement “because that’s what we love doing”. Liubinskas says. “Just being an advisor is not enough for me. I don’t just want to get my hands dirty. I want to get mud all over me from head to toe. I want to be filthy dirty in the trenches.” “So what we set about doing was building an infrastructure which would be a machine that builds startups.”

Why startups fail As the pair developed Pollenizer, they decided that strong company founders with ideas capable of reaching 1 million customers were their ideal clientele. During the incubator’s first year of operation, they worked with around 60 such individuals, and a pattern emerged that explained their collective failure to get traction. “They all had exactly the same problem – they lacked the ability to get focused and to move fast.” Noting those issues helped Liubsinskas and Morle learn how to help startups . “No-one quits their job for a small idea,” Liubsinskas says. “By the time people think about an idea, they have put it together and it is so huge. There are 10 moving parts and they all have to work together. They get a dotcom [Web address] and try to do it all at once. “The reality is you have no resources, no momentum … nothing.”

The low level of resources on offer to a startup has led Pollenizer to ground entrepreneurs, so they quickly test their ideas to see if it is possible to recruit real, paying customers and prove their ideas are valid. “You have got to go and get one customer and make them happy,” Liubisnkas says. “Then you can think about the millionth customer.” The company has therefore devised a series of tactics that helps startups to test their ideas. For one recent project, a pet food delivery service called Dog Food Fairy, the company arranged for a colleague to dress in a dog suit and visit popular off-leash dog walking areas around Sydney to hand out fliers about the new service. The stunt quickly drew dog-walkers’ attention, but also proved that they had little interest in finding a pre-delivered slab of Chum or Pal waiting on their doorsteps once a month. The company also tests business ideas online. “If you have a single Google ad with a single page and a PayPal button, there are 80 variations you can test,” Liubinskas says. Pollenizer happily tries many of those combinations to test a business idea, even though the team has to process incoming orders manually. “We call it the Wizard of Oz approach – the customer sees an ad, clicks a page, but they don’t know we are all running around madly fulfilling an order.” Pollenizer does so happily, because testing a business is about flexibility, not scalability. One company that helped the Pollenizers to develop this methodology was 3eep, a company that provided online tools to help community sports clubs connect with members and organise their affairs. When the Pollenizers found the company, it appeared successful, having lined up global partners and built a service with many features, but was nonetheless struggling. “We said to them you would have been better off starting with women’s netball teams in 13

PEOPLE IN BUSINESS

Parramatta and all you offer them is a training notification tool,” Liubinskas says. “There’s no business in that alone. But once you get the netballers, you get the soccer players and once you get Parramatta, you get another suburb. And once you get them using notifications, then you can get them using another feature.” Another company the Pollenizers recently worked with went through 45 iterations of its business model in four weeks, at a cost of $4,500, and failed. “We had a lady come in and she had a quote from a Web design company for $100,000. We said you would be crazy to spend that money, because you don’t know if anyone wants your idea.” “When it failed, she was happy. She said ‘You have just saved me $95,000’. At the end of that, one of our team members celebrated the failure. Fast cheap failure is what we celebrate.”

Confusing duality For some entrepreneurs, this ‘start small and test’ methodology is confronting. “The duality is hard,” Liubsinskas says. “Founders have this big vision for a business that they want to get out of bed to work on every day, but to do it they have to go and work in a very small business.” But the Pollenizers stick by their methodology because “a lot of people underestimate how many things you have to get right, or they think you just get a Web development company to build you a Web site and Tweet about it a lot. But when you think about it, most people build a brand new business that no-one has ever built before and they think they are going to get it right the first time. To be honest, it takes 10 significant iterations to get it right. The only way you can do that on a budget is to start ridiculously small. Because founders don’t think about 10 steps, they spend all their money on the first version and blow it and have no room to try again. This is the beauty of going after just netball players in Parramatta. If you get it wrong, you can go and do something else!

SEPT 2011

“But typically people go and spend a million dollars and take a year to do it. Our principles are to start with a small group and make them phenomenally satisfied. Then you can grow from there. We do want a significant market with potential for a million customers, but you have to start with 200.” Liubinskas says some founders don’t like this idea and feel like Pollenizer is diluting their ideas. “We say ‘Your dream is still there, but let’s start here and make sure you have something to build from’.”

“People build a brand new business and think they are going to get it right the first time. It takes 10 significant iterations to get it right.”

Shared risk and reward Another important element of the Pollenizer model is sharing risk and reward with company founders. Pollenizer usually starts with a strong founder who is not a technologist, and insists on businesses that won’t make money through advertising. The founder and Pollenizer each put in some money, which covers costs of a small team to work on the company. The founder leaves their job, gets a small salary and works full time on their idea, and Pollenizer takes 50 per cent equity in the new company. “It’s not the same with a service provider,” Liubinskas insists. “You need skin in the game. It cannot be about just consultancy. It has to be about the upside, because everyone is aligned.” This approach means that Pollenizer’s people are ‘everything’ for a startup, because they need a cando attitude, a willingness to constantly develop their skills, and above all, a certain fearlessness. “Pollenizer attracts people who don’t want big salaries,” Liubisnkas says. “People say they

Some of Pollenizer’s successes Some of the companies Pollenizer has worked on include: • Spreets, a group buying company acquired by Yahoo!7 for $40 million (See My Business May 2011); • Mogeneration, a digital content management company recently secured over $1 million dollars in funding; and • Linqia, a social networks marketing company that was acquired by new owners.

PEOPLE IN BUSINESS

work here because of the team, the challenge, the impact they can make. Everyone is working on two businesses at once and the speed of learning is great.” Most employees come from personal networks, and those with formal business training often don’t make the cut. “MBAs have not worked for us at all,” Liubinskas says. “They do not think fast enough. We are 1 per cent strategy and 99% implementation. The people who struggle here are those who are fearful of trying because it suffocates the business if you do not get it out there.”

Building for the future Pollenizer is now building for the future. The company has brought in Tony Faure, a former CEO of ninemsn, and numerous other experienced staff for a total local headcount of 25. Now working on its a wholly-owned venture, a staff feedback tool called Wooboard, Pollenizer is also expanding its role as a source of funding. The company has already run one fund, with $500,000

in the kitty, and is working on another. Previous investors in Pollenizer companies are the source of these funds and Liubinkas says they were happy to chip in, because they have seen the company’s methodology works. “For Wooboard, we are about to close a $100,00 round of funding, because the investors know us,” he says. “Fast access to capital is the key. If [Spreets founder] Dean McEvoy had to go through a 12-week due diligence cycle, it would have been over before it started.” These activities have not gone unnoticed and the company has considered franchising its model, with Liubinskas confident the world could support Pollenizers in two or three other locations. But that growth won’t be automatic. “Post-Spreets, people have come to us and said you are a very efficient incubator. But we want to get better at starting businesses. We want stronger teams, stronger founders and stronger businesses. “The same 80 people we have now can produce another 30 businesses in the next two years.”

Offshore developers Pollenizer employs 80 people, with 25 in Australia and another 55 in an Indian software development facility that does most of the company’s software development. The India facility is, Liubinskas says, “critical” to the company’s success and he recommends other businesses at least try to work with people offshore to get experience of working with teams at a distance. “You get the same people – they just have lower living costs,” he says. “I think people should try it. Put out a small project to three people overseas and see what happens.”

PEOPLE IN BUSINESS

The hard-working tourist

Matthias Hammer’s Biosphere Expeditions is a leader in ‘voluntourism’, a trend that sees holidaymakers mix relaxation with working for a good cause. STORY BY NICOLA CARD

Image © Biosphere Expeditions

SEPT 2011

PEOPLE IN BUSINESS

ancy a holiday with a purpose? Dr Matthias Hammer has plenty of ideas for you — such as observing lions, leopards and cheetahs in Namibia, Botswana and Zambia. If you like to snorkel, Hammer can help you drop in on the coral reefs of the Honduras. Or perhaps you would prefer Slovakia’s wolves and bears or Arabian leopards in Oman’s desert mountains. If a lusher holiday appeals, jaguars and pumas in the Brazilian rainforest is another option. Closer to home, Hammer can get you up close with Flat Back Turtles in West Australia. Wherever you go, expect to work and play, because Hammer’s business, Biosphere Expeditions, isn’t only interested in popping you onto a banana chair. Instead, the decade-old business offers you the chance to experience the natural world while also helping to improve it by volunteering to work on conservation projects. To make you feel even better about yourself, twothirds of volunteers’ holiday contributions go into the conservation project in which they participate. Each trip is accompanied by an expedition leader, who is an expert in local wildlife. In 2001, Hammer explained his German army background, passion for science, environmental sustainability and adventuring to a UK-based philanthropist, who provided a $48,000 loan to kickstart Biosphere Expeditions in the small city of Norwich. Things got off to a slow start. However, the self-assured Hammer had no doubts about his business venture. “I knew this was such a good idea that it would have to work; there would be lots of people interested in it. I just underestimated how long it would take to reach people,” he said. “Because you are so fired up about it yourself, you think others will think the same way, so you do not doubt yourself.” For the first 16 months, business trickled in and Hammer was naturally anxious. “Whenever you are starting a business, the first three to four months are full-on with anxiety with you asking yourself if this will work. But while it was quiet, we continued to develop the product and add more expeditions while marketing the business as much as we — or I — could. It was just a one or one-and-a-half-man band at that time.” Head office in Norwich has exposed some cultural differences. In Hammer’s words,

Although we have offices, no-one ever comes to them and our phones do not ring — people contact us by email. That is the way we want it.”

“Germans communicate differently to AngloSaxons, there is no word in German for ‘small talk’; we come straight to the point. Talking about the weather or asking about your family is perceived by Germans to be slightly deceitful, as people are not seen as really interested. For us, it’s a case of ‘let’s just get down to business’. “Whether it is praise or other, I do not mince my words. The Anglo-Saxons in particular find that hard to deal with and that causes some friction, but with my military background, I have a style that is firm but fair. It may be unusual, but it works. I expect a lot and I make that clear.”

PR, PR and more PR The company’s key marketing tactic is public relations — it uses no other form of marketing — and Hammer is content to operate this way, because he feels the best way to communicate Biosphere Expeditions’ products is through a detailed explanation of the experience. “It is such a unique concept that the press and the media like the concept, and that is good for our business,” Hammer says. The company greases the media’s wheels with a Website that offers a library of easily downloadable high-resolution images, a handy headstart for a travel story (or for anyone seeking media coverage — Ed). “We could not operate without the Internet,” he adds. “It is absolutely essential to the business model and central to what we do. It is our window to the world. We put lots of effort into putting exhaustive information on the internet, and although we have offices, no-one ever comes to them and our phones do not ring often — people contact us by email. “That is the way we want it, the business is efficient and streamlined. Low staff numbers helps contain costs.” In other cost-saving measures, expedition leaders who are scientists or game wardens are freelancers, drafted in for particular expeditions on as ‘as needed’ basis.

“For us, the three biggest recruiters [of voluntourists] are word of mouth and repeat customers, the Internet and our PR work,” Hammer says. “We do not advertise at all, we just work with publicists, and we have our own inhouse contacts, so we get as many journalists or film teams as possible on our expeditions.” Some of the costs associated with funding junkets are offset through sponsors in the form of airlines, tourist bodies or hotels, but on occasion, Biosphere forks out for airfares for journalists. On balance, a small price to pay for the subsequent media coverage. Adding to the appeal for voluntourists is the not-for-profit status of Biosphere Expeditions, with two-thirds of their expedition contribution channelled back into the project in which they participate; and a hallmark of the business is that it gives back as much as it can to local communities.

Joint ventures This approach creates assets for the communities that Biosphere Expeditions visits. “We do not own property, that is not what we are about, but we give our local partners a sum and that enables development and we are not talking much — say $20,000 in Peru for a research station,” Hammer says. “And $50,000 for the Namibia facility that enables them to develop the facility and with it jobs, and they repay us over the years by free board and lodging.” “Once that is paid off, interest free, we just become a customer, but at least in Peru we did this seven years ago and the research station is in place. We can use the premises, but they can also host other university groups or researchers and it generates capacity and local jobs.

Moral high ground The company can also point to real benefits for the environment. “There are several levels of benefits to the environment: the species worked on directly. For 17

PEOPLE IN BUSINESS

example, we have had a protected area declared for snow leopards, so that is a positive outcome for the species, and management plans are in place,” Hammer says. “And on a local level, we train local people so the next generation of conservationists is coming through. The research centres are in place and we run scholarship programs that enable local people, students or school leavers keen on conservation, to come and join expeditions. Also, we produce material for schools; we want to get them young, as you can get the messages across more easily.” The conservation-friendly nature of the business has won it supporters the world over. Sarah Lowe, who runs the Australian arm from South Melbourne, provides her services — and office space — free of charge. “I’m happy to devote up to a fifth of my working week in my travel office to Biosphere, because I really support the concept,” she told My Business. “A similar setup operates in France, so that also helps contain Biosphere costs.” All sounds too rosy a picture? There are some thorns in the side, says Hammer: “Ten years ago, voluntourism was completely new, but now it is such a growth market within tourism that you have a lot of cowboys jumping on the bandwagon ... Internet reviews expose how badly organised some tours are, people say ‘they got me there just for my money’ and they do not see what contribution they have made other than lining the operator’s pockets. That is not what Biosphere is about.” Then there’s the occasional instance of the “really, really annoying wildlife journalist” who expects red carpet treatment on some icy mountain slope. (We suspect the otherwise bulletproof Hammer is yet to recover from the attitude of one prima donna.) The third and final bugbear is “the popular misconception that voluntourism is just for 20-yearolds who want to have a good time and party every night and expect to sleep in a hammock in the jungle. In reality, we are in a completely different market; our portfolio is so diverse — for example, the turtle expedition in West Australia is based at a five star resort. You can have a great time and be comfortable; we are geared up for the 30-plus professionals who are cash-rich and time-poor, 18

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What is voluntourism? The rise in popularity of voluntourism, the holiday that combines work for a worthwhile cause, is attributed in part to the December 2004 tsunami, a disaster of massive proportions that triggered social conscience. With people reviewing the value of their leisure time and wanting to make a contribution, travel companies started to offer holidays in areas and communities requiring support.

Image © Biosphere Expeditions

The occasional ‘really, really annoying wildlife journalist’ expects red carpet treatment on some icy mountain slope.” also retirees, baby boomers,” said Hammer. Given his need to travel frequently on longhaul flights being at odds with his commitment to sustainability, My Business asked Hammer what’s the most significant personal measure he’s taken to reduce his carbon footprint? “Being a vegetarian. The UN has identified vegetarians and vegans as one of the most important ways to reduce our impact on the planet and there is a view that mankind needs to

move to a vegetarian diet if we want to combat the worst impact of climate change. It takes as much as 7000 litres of water to produce just one kilogram of beef,” he said. “The impact though our obsession with meat on the planet is enormous – apart from all the animal welfare issues associated with it.” For more information, visit www.biosphereexpeditions.org or www.facebook.com/biosphere. expeditions1

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PEOPLE IN BUSINESS

Happy herbs Australian Fresh Leaf Herbs Managing Director Jan Vydra

SEPT 2011

PEOPLE IN BUSINESS

To get herbs into customers’ hands in the right condition and build a brand, Australian Fresh Leaf Herbs developed its own online ordering system that has since sprouted into a new business selling software. STORY BY SIMON SHARWOOD

an Vyrda grows herbs, but runs his business as if it was a manufacturer. The reasons why lie in the practices he encountered taking his company, Australian Fresh Leaf Herbs, from a $22,000 startup in 2007 to a $4 million, 60-person company today. “In the old days, farmers grew their crop and drove it to market themselves,” Vyrda explains. “Then what happened was that farmers wanted better quality of life and agents became part of the supply chain to sell their goods at market.” Supermarkets and large retailers would have arrangements with agents to secure their stock,

Vydra’s answer was to audaciously rework the supply chain for herbs to his advantage, as he envisioned an online portal that retailers would use to place orders for herbs, instead of going to market in the hope that their desired stock would be available. Today that vision is a reality and while the company still relies on herbs going to market, it can predict what it will be able to sell, and when, because it has gone to the trouble of starting its own farms. Two locations in Queensland and another in Victoria now produce 17 types of herb year-round.

If I want to see how many hours went into basil production, I can.” and independent retailers were left to their own efforts to buy the goods they wanted by walking around markets. If a certain herb wasn’t available, retailers had no way of knowing and could wander around fruitlessly (pardon the pun) in search of product that was not on sale. When Australian Fresh Leaf Herbs started in 2007, Vyrda and business partner William Pham quickly realised that the existing supply chain would not help them to meet their goal of developing a branded range of fresh herbs. “We are selling beautiful stock out, but retailers are not getting what we wanted,” Vydra says. “Everything was getting damaged in the middle of the supply chain.”

The company has also made substantial investments in software that provides an online portal customers use to place orders for herbs. When they log on, customers can see what is available, and Australian Fresh Leaf Herbs packages their orders ready for collection. Instead of going to market and wandering around looking for herbs, retailers visit an Australian Fresh Leaf Herbs’ distributor where their order awaits. “Retailers used to want some sage, for example, struggle to find it, and ran around the market looking for some to buy,” Vydra explains. The company’s new system makes things far easier for buyers, which makes them more likely to choose Australian Fresh Leaf Herbs. That 21

PEOPLE IN BUSINESS

ease of purchase, and the steps taken to ensure quality product makes it likely that the company’s ‘Garnished Flavours’ brand will become more visible, spurring consumer demand which drives demand from retailers.

Farming software Australian Fresh Leaf Herbs’ early efforts to offer this kind of premium service didn’t work. Herbs reached the market, but compiled orders were sometimes wrong, leading to frustrated customers. And Vydra simply couldn’t get the information he needed to manage the process from farm to customer. “We had the strategy and we were using virtual private networks to log into to MYOB and then Crystal Reports to analyse performance. That was too many tools. We realised we needed one system wanted it to be a central resource for all our affairs.” To achieve the service Vydra envisioned, Australian Fresh Leaf Herbs took the decision to develop its own faming management software. Software development is, however, a notoriously complex process that can easily run off the rails and often ends in cost overruns, blown deadlines and tears before bedtime. But Vydra felt developing a platform to manage the business was essential. “I have studied business and I have always been process minded. When I think about something, I think about all the little cogs it needs to roll.” That commitment to and desire for a granular understanding of many aspects of the business’s operations made the decision to develop software simple. “I didn’t see it as a risk. I saw it as a necessity,” Vydra says. “There are agriculture management applications out there, but they are not well integrated. One we looked at didn’t 22

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have good order processing and procurement functions. Another was good on procurement, but bad at managing the manufacturing process. “I wasn’t saying, ‘Lets invest in a $200,000 system’. I saw an opportunity and wondered how we could get to it. So it wasn’t a risk — if we did not do software, the order errors would continue,” and the concept behind Australian Fresh Leaf Herbs would not have flowered. The resulting application — dubbed Freshweb — is partly inspired by manufacturing management applications and techniques. “We’ve built growing, procurement, despatch and administration modules, all integrated together,” Vydra says, all tied to the portal so that new crops are displayed to buyers as they become available. The result is an amazing 100,000 weekly bunches of herbs despatched to customers, thanks to an extraordinary level of detail that Vydra and his team can use to analyse the business. “If I want to see how many hours went into basil production, I can,” he says. Some data is even visible on iPads, which can be used on wireless networks around the company’s farms.

“A small thing like getting a daily production report is a good little win,” Vydra says. And the extent to which the software has become the driving force in the business had led to some interesting questions in the office. “Its a discussion we have all the time — are we an agribusiness?”

Software offshoots One answer to that question is negative, because such is the sophistication of this software that Australian Fresh Leaf Herbs is now productising its software and creating a new business to sell it. “We now find ourselves with a herb business and a software business,” Vydra says. The software business will operate at arm’s length from Australian Fresh Leaf Herbs. The company’s early plans never envisioned this offshoot, but Vydra is happy to see where the software business takes him. “I am excited about getting our herb brand out there and we found this was the best way to do it. Could i have done it better? Probably. But I think we are doing alright.”

PEOPLE IN BUSINESS

, r i a h g i b , r i a Big

h t w o r g big STORY BY SIMON SHARWOOD

Jason and Jodie Kliese of Hairhouse Warehouse Rockhampton 24

SEPT 2011

Jason and Jodie Kliese had previous experience running a franchise, but say their current venture as operators of a Hairhouse Warehouse franchise in regional Queensland is showing them how to succeed in business â&#x20AC;&#x201D; with a little help from local television advertising.

PEOPLE IN BUSINESS

n the Friday before the 2011 grand final of MasterChef, Rockhampton Hairhouse Warehouse franchisees Jason and Jodie Kliese booked a TV ad to air during the program. The cost? Under $500 to reach a potential audience of 250,000. The Klieses didn’t have to spend to make their commercial — the weekly three per cent marketing fee they pay to Hairhouse Warehouse includes national marketing efforts like television ads. But the pair also budget an additional three to six per cent for local advertising beyond the national campaigns the franchisor conducts. “National promotions happen three or four times a year, so to be seen all year, I advertise in-between,” says Jason. “We need to make sure the customers know we are still here.” Television appeals because, Jason says, “Regional TV is phenomenally well priced.” “We opened in February 2010 and consistently used [local radio station] Hot FM.” Results were not immediate — Jason believes “it always takes three or four months to get traction” — but says “business is up 45 per cent a week compared to the same weeks last year,” an indication the promotions are working. Kliese feels the key to working with broadcast media is to build a relationship and spend consistently. Local radio and television stations in Rockhampton have the same owner and that has made it easy to build a relationship with a sales rep, who has come to understand that the franchise is in it for the long haul. Better rates for advertising have followed. Kliese has since expanded into other broadcast media, working with radio stations whose audiences are centred on nearby towns like Gladstone and Emerald, but have some Rockhampton listeners. He is also trialling digital television advertising on 7Two. That station has a small audience of around 8,000 local viewers, but Jason says it offers “very low cost”.

Making ads stick The Klieses know that advertising alone won’t boost their business, so they invest time and effort in training to make sure they can cash in.

You can’t get a haircut or body piercing online.

“For each local promotion, I always have a meeting with the staff to explain the offer and make sure they collect any comments customers make about our presence on TV and radio.” Jason also keeps a close eye on revenue in the wake of advertising. His rigour in doing so reflects his determination to work on a business, rather than work in it, a desire created by his experience working in another franchise system. “When we first looked into buying into Hairhouse Warehouse, we wanted to buy a business to grow, not buy a job to be stuck in the nuts and bolts,” Jason says. “We worked in another franchise in the food industry. Food has terrible hours — while others relax, you work. It felt like we were always working at night.” Those hours were not compatible with the Kliese’s desire to start a family (the couple now has two boys) and as Jodie has previously owned an independent hairdressing business, the pair felt a franchised salon would not be a step into entirely unknown territory. “We went for a franchise because of the networking,” Jason says. “The ability to bring a well-known and phenomenal brand into central Queensland was a good opportunity and we liked that we would be part of national promotions. “The return from national marketing funds is good. You get new merchandise and banners and the training is excellent — trainers fly here and

take our stylists for the day to teach them new styles. If you are unsure about something, there is always someone to help. The ability to network is worth what you pay — if you want to grow it, that’s what you need.” Another way Jason feels franchises help entrepreneurs is in securing leases in attractive premises. “I believe a franchise system gets a better reception from landlords, because they know each other — they’re always out there talking to Lend Lease, Stocklands and Westfield.” While the Klieses value the support that comes from being part of a franchise group, they decided they would not rely on it, and went into the new venture intent on being business managers rather than hands-on operators. “We started in February 2010 and moved in a manager in November of the same year,” Jason says. “We looked for someone with the same mindset and skills we have, and a desire to win. We found a manager with those skills and the ability to grow the staff, too.” The manager is charged with ensuring the company delivers world-class service, leaving the Klieses to work on the business in other ways, like the advertising Jason worked on before the MasterChef final.

Success in a tough climate The Klieses’ efforts have seen their revenue grow 45 per cent compared to 2010, and Jason says the pair’s business is not experiencing the retail downturn — or competition from online retailers — that many shops complain of. “You cannot get a salon online and you cannot get body piercing online,” he says. “We do have a retail section, but it is stuff you need to look and feel before you buy.” And if the current retail environment does produce trouble for the pair, Jason is confident the franchise has more to offer and can help his business to thrive. “The great thing about our brand is there are so many elements to the business We can extend into eyelash extensions or spray tanning in the future.”

FINANCE

Restore your trust in trust funds

Trusts have a whiff of tax avoidance about them, but are legitimate ways to protect your assets — and your family, writes Matthew Schlyder.

aving worked with business owners and investors for over 20 years, it never ceases to amaze me how little people know about trusts. According to the Australian Taxation Office, there are over 660,000 trusts in Australia. With so many, you would think that the understanding would be greater. The press around trusts, and the attitude of the government, is usually less than complimentary, with what seems to be an intent underpinned by mischief. It’s not as though trusts are a new concept. In fact, they have been around since the thirteenth century, and are from an old English law going back to the time of The Crusades. So how could something so enduring be so misunderstood? Trusts exist in many shapes and forms. You may have a trust in place that you don’t even know about: • A bank account set up for a child; • A superannuation fund; or • A family trust. A trust is nothing more than a relationship where one party (the trustee) holds property (an asset) for the benefit of other parties (the beneficiaries). The trustee makes decisions about the property, and the beneficiaries enjoy the benefits. Without trying to be too technical, the trustee is legal owner of the property and the beneficiaries are the beneficial owners. Under a trust, the two are different. If they were the same, there wouldn’t be a trust. From a business and investment perspective, the usual types of trusts people have are: • Discretionary trust (family trust); • Fixed trust (unit trust); • Self managed superannuation fund; or • Testamentary trust. Let’s have a look at each in detail.

Family trusts The main feature of family trusts is that the trustee has the power to distribute the income and property of the trust to any of the beneficiaries in any proportion. All beneficiaries are not 26

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necessarily named. You might set up a family trust that allows the trustee to distribute to you, your spouse, your children, your grandchildren, parents, brothers, sisters, companies you own and other trusts you are a beneficiary of. So long as the person being distributed to is within the list, then the trustee can distribute to them, to the exclusion of others.

Unit trusts For a unit trust, the beneficiaries have a predetermined entitlement to the trust’s property and income. The trustee must distribute property and income according to these rules. A common type of unit trust is where each unit-holder owns a percentage of the trust, and will receive that percentage of all income and property.

Self-managed superannuation fund The self-managed superannuation fund (SMSF) is fast becoming a very popular trust as Australians become more and more concerned about providing for our own retirement. An SMSF is governed by specific superannuation law and is regulated by the Tax Office, but fundamentally, SMSFs are trusts. They come with a low tax environment (zero per cent to 15 per cent), but the trustees must adhere to the superannuation law to enjoy these benefits.

Testamentary trusts Testamentary trusts are like family trusts, except they are provided for in a Will and only come into existence when you die. They are an excellent vehicle for ensuring your assets are controlled for those you wish to protect after you die. They are particularly advantageous for holding assets for children under 18 (for tax purposes), protecting assets for professionals whose assets may be at risk, keeping assets out of the reach of a spouse under the Family Court, and ensuring the longevity of assets in cases where you don’t want the beneficiaries to have control of them after you have gone.

FINANCE TRUSTS

The main benefits of using a trust are: 1. Asset protection — Assets owned in trusts are generally protected from creditors and third parties (provided they are not established to defraud creditors, the trustees have acted appropriately and they are correctly established): i. Under bankruptcy law and the Corporations Act, it is the assets that are beneficially owned by the insolvent that are at risk. If the insolvent is only a potential beneficiary under a family trust or a testamentary trust, the assets should be protected; ii. Assets owned in superannuation funds are excluded from access by trustees in bankruptcy; iii. Partners in partnerships are jointly and severally liable for all debts of the partnership. This means that one partner may be held liable for all debts, if the other partners are incapable of meeting their share of the partnership debts. If the partners are individuals, their other personal assets, which have nothing to do with the partnership, may be accessed to clear the debts. A trust will limit the access of creditors to personal assets; and iv. The Family Court will generally not include assets under a testamentary trust in the calculation of matrimonial assets. Also, a well drafted testamentary trust will also protect assets for the deceased’s spouse, children and grandchildren, from subsequent matrimonial disputes, in a day when it is normal for widows and widowers to remarry. 2. Estate planning — The assets in a trust are not covered by your Will (which is a trust in it’s own right). Your Will only addresses the assets that are in your name and that you are the beneficial owner of. So a trust will allow the continuity of asset ownership after you pass away, or if you become bankrupt or incapacitated. You just need to make sure that you provide for the right people to be the trustees, as they will ultimately make the decisions in regard to the trust. 3. Taxation — A trustee must distribute the

“ Recent changes to tax laws regarding trusts are designed to stop the mischief of the minority.” income of the trust at least annually. The trust only pays tax on income it doesn’t distribute, and this is taxed at 45 per cent, so this doesn’t happen very often. The tax on the income is paid by the beneficiary who receives it, at whatever rate of tax they pay. If it’s a company, then it’s 30 per cent; if it’s an individual, then this will be anywhere between 0 per cent and 46.5 per cent. The income doesn’t have to be paid there and then in

cash, but it is owing to them. Assets or a business owned in a family trust can save significant amounts of tax depending on who the income is allocated to. Take, for example, a business that earns $240,000 with the income distributed to three adult family members who have no other income. The tax on this amount is $56,250. If this business was operated in an individual’s name, it would be $85,150. That’s a difference of $28,900 on the same income. If the business was operated by a company, the tax would have been $72,000. Superannuation funds are a bit different. The trustee will pay tax on the income at 15 per cent. If the fund is paying a pension, then the tax rate is zero per cent. More recently, the tax laws have been challenged and changed in terms of how trusts distribute their income and what they should and shouldn’t do. Fundamentally, nothing is different in terms of what a trust can and can’t do. In some ways, the law has just been clarified, in other ways, some of the tax advantages have been restricted. I’m mainly referring to changes to the rules where a company distributes to a company (and caps the tax on the income at 30 per cent), or in the recent budget where the low-income threshold is to be removed on passive income for children (meaning you can only distribute $416 tax-free to children instead of $3,333). These changes don’t change the fundamentals of a trust. They in no way reduce the overriding reasons for including a trust in your business or investment structure. Like most changes to rules, they don’t impact on the core of the issue; they are designed to stop the mischief of the minority. Make no mistake, trusts are here to stay. They have been around for 800 years, and they will continue to play an important role in asset structuring and managing family wealth for many generations to come.

Matthew Schlyder is Managing Partner of Brisbane business accountancy firm, elliotts (www.elliottsgroup.com.au). 27

FINANCE CASHFLOW

Stop growth killing

your business As you grow, demand for cash can become voracious and actually harm your business. Bruce Land plots a way out of the growth trap.

Bruce Land from www.yourbusinesscashflowexpert.com is a Member of the Institute of Chartered Accountants and a Graduate Member of the Australian Institute of Company Directors. He has over three decades’ experience in helping businesses grow and manage cashflow and has produced a coaching and educational program that simplifies this process for small to medium-sized enterprises. Bruce can be contacted on (08) 9288 1840 or at info@yourbusinesscashflowexpert.com 28

SEPT 2011

here was once a high-flying suburban retail business that had doubled its annual sales over two successive years and grown its revenue from $250,000 to $1million. By all external appearances it was an Australian small business success story with a bright future. But to the shock of many, in the midst of its rapid ascent, it collapsed, leaving 10 people unemployed and the owners of the company in financial ruin. Sadly this case of sales growth killing a business is one I’ve witnessed many times. Every entrepreneur sets out to grow their business bottom line. But few realise there can be a dark side to it, particularly in a bricks-andmortar business, which can cause a seemingly thriving enterprise to go belly up. Many business owners, for example, don’t factor in the additional costs that come with growing a business. The ‘hard’ costs include extra staff, new premises and new equipment — and, of course, there’s also the ‘soft’ costs of the business owner’s time to create the growth. The hard costs have to be funded somehow and the best source is obviously the cash generated from the extra sales. As a result, cash often gets trapped in a business as it starts to grow. The diagram opposite shows how — it depicts two flywheels sitting side by side with the one on the left joined to the one on the right by a small tether. The profit flywheel on the left generates the cash for the business and the asset flywheel on the right says, ‘Thank you very much — I’ll have some of that’. It is a symbiotic relationship, yet each wheel spins at its own speed. So as a business starts to grow its revenue, attracting new customers and expanding its product range, the profit flywheel on the left also starts to expand as the new money more than covers the extra costs. But this flywheel demands careful attention and needs to be kept well oiled,

FINANCE CASHFLOW

“ Cash often gets trapped in a business as it starts to grow”

Your Business Cashflow Expert’s cashflow flywheels (not a tribal tattoo, but)

otherwise it can start to slow down and spin off less cash with potentially disastrous effects. Meanwhile, the asset flywheel, which takes money from the profit flywheel to which it is tethered, can also turn nasty if not closely monitored. It must keep rotating at the same speed it achieved before the growth period, if not faster. If it slows, more of the cash profit you make from each sale will get trapped in your assets – your debtors and/or your inventory – than before. This means that if you extend credit, it is crucial that the relative amount (percentage of every sales dollar) does not increase at this time. Otherwise, the cash from the extra sales may be absorbed by your debtors and taxes. Similarly, as a business grows, so does its inventory levels to support the higher level of sales. So you need to exercise some discipline or to avoid the problem of old or redundant stock that you cannot sell. Your suppliers will likely fund part

of your growth, but they will have limits to what credit they can or are prepared to extend to you. A lack of internal procedures to monitor its flywheels was the problem with the unfortunate retailer mentioned earlier and so the wheels fell off in spectacular fashion. That’s why sales growth can kill!

Seven questions to escape growth traps Fortunately, there are three key figures that, if monitored closely, can help you avoid this fate: the net cash retained from every new sale, the overall net cash profit and the cash retained to fund the business’s working investment (a subset of its working capital). These numbers can be obtained by any small to medium-sized (SME) business owner by asking seven simple questions: 1. What is their monthly revenue? 2. What is their average gross margin?

3. What are their total variable costs (eg. merchant fees, sales commissions)? 4. What is the net cash profit per month as a percentage of sales? 5. How many days from the date of invoice do their customers pay them? 6. How many months’ inventory do they hold? 7. How long after invoice do they pay their creditors? Questions one, two and three will give the percentage of cash profit generated from an additional sale, while the remaning questions will reveal how much of this cash profit gets automatically absorbed into the working investment of the business. The difference between these two numbers indicates the cash available to the business to fund its own growth, subject to the timing of capacity increases. Question four gives the relative cash retained from existing operations. Careful monitoring of this figure will give a snapshot of the business’s liquidity, as it is from that net amount that debt repayments have to be made. These calculations can be made by the SME owner at any time, using their knowledge of their business, provided they have systems in place to check that their intuitive ‘feel’ is supported by the facts. Fast-growing businesses can find it challenging to have the data readily available because they are run off their feet trying to meet customer/client needs. So it takes discipline by the owner to keep up to date on their business indicators. Currently, in Australia, we are facing a twospeed economy with a significant number of businesses’ sales having stagnated — many are even going backwards. But applying these seven questions can be just as effective in a business that has a shrinking ‘profit’ flywheel as in one that is marking time. In either scenario, keeping your hands and eyes on the wheels can help you avoid a financial crash.

FINANCE LEADERSHIP

CEOs must focus

to succeed N

ew businesses are most often founded by focused, achievement-driven CEOs. Tick that box. But when I engage with them — generally in the context of raising capital for their venture — I find the edges of their strategic thinking pretty quickly. There is a focus on short-term deliverables, chasing new business opportunities, and a dearth of clear strategic rationale behind their vision. So what to do? Discipline. In one word, the focal point for consistent performance will be driven by strategic discipline. Growing businesses generally require additional cash resources to fund operations. Many businesses make the mistake of expanding too quickly, while carrying forward too much debt and lacking capital sources. The road to success has been littered with businesses that grew themselves to death. This article will examine important factors business owners need to take into consideration to successfully fund a growing business, including: • Reviewing company operations for cashflow and underlying profitability; • Borrowing from your bank; and • Equity capital sources.

Reviewing company operations for cashflow

CEOs need discipline to focus on finance, otherwise their businesses will be caught in growth traps, writes Christopher Witt.

SEPT 2011

First, businesses need to stage capital requirements to fit in with the timing of their expansion. Consider the following case study. An industrial machinery company was on the cusp of accepting a multi-million-dollar order for equipment to be shipped to Mexico. However, the cost of parts and motors for assembly was in the order of $1 million. The bank felt their line of credit was at its limit, and refused to extend additional credit. As a result, the business nearly lost the order, as it could not pay for the parts for manufacturing. Luckily, they saved the day by negotiating a customer pre-payment of 40 per cent of the order value, and a further 40 per cent on shipment. The balance of 20 per cent was paid 30 days postinstallation of the equipment. Unfortunately, many

FINANCE LEADERSHIP

businesses don’t survive to tell a similar story. In this example, the business was carrying levels of debt that suggested it had been trading unprofitably for some time. This ‘loss carry-forward’ meant that cash resources were constrained from investing in new activities. Discipline is required to rein in loss-making activities, re-focus the business on profitable trading and release cashflow. The deeper problem beneath the surface for many companies is the incorrect pricing of their products. Often there is poor financial data on the true costs of total service provision over the sales cycle, from pre-sales prospecting through to post-sales service and warranty. The result can be chronic low levels of profitability, and even loss-making sales. This is masked by poor management of available cashflows, where tax is not withheld and accrued for later remittance, or some portion of profit retained in the business to fund expanded working capital. Other cashflow problems are often directly linked to poor account collection performance. The absence of direct debit facilities or automated collections via credit cards can result in considerable expense and resources being tied up chasing delinquent accounts. One solution to this problem is a clear policy on customer payments, and an escalation procedure for late accounts.

“ The focal point for consistent performance will be driven by strategic discipline.” A third source is your bank. Even companies with good relationships with their banks need to prepare themselves for the terms associated with bank borrowings. While there has been a significant decline in business lending since 2008, borrowing from a bank can be a suitable option if you can afford the interest and principal repayments and the debt is considered ‘good debt’. Often, banks will require Director’s guarantees, where Directors are personally liable for company bank loans. Banks may also require security, such as property collateral or a secured position over the company’s assets, which would give them the right to sell assets in the event of default.

Borrowing from your bank

Equity capital sources

The market offers multiple sources for capital. The first source (and generally the fastest) is internal fundraising by bringing forward your collections, and deferring your payables. You can also sell surplus assets you may have in inventory with a one-off sale, or dispose of dormant activities the business is no longer actively pursuing. A second source can be from your lessors. You can examine whether your landlord would consider releasing security deposits put in place some time ago. You can also consider selling and leasing back assets, or leasing rather than purchasing capital assets such as vehicles, industrial equipment or IT hardware.

When internal sources are insufficient, companies should investigate friendly sources of equity capital. These sources could be from current shareholders or from employees. If considering the latter, you should seek specialist legal advice in order to explore whether the company’s Employee Stock Ownership Plan (if it exists) can be an investor in the company, or that your company can qualify to offer shares to its employees. In some instances, employees can sacrifice salary to purchase shares in the company. This will reduce your payroll costs, but result in dilution of the owner’s equity interests over time.

Another alternative can be ‘angel investors’ (aka ‘angels’), usually former executives or entrepreneurs who may be looking to invest in private business, usually in industries where they have some expertise; they can bring positive influence to management, and assist your growth and development. Angels may be a more desirable option than family and friends, due to the risks associated in mixing business with close, personal relationships. Regardless of where a company finds its capital, good practice before borrowing must involve a review of company operations to reduce unprofitable products and activities, and improve your fundamental profitability. The reality is that if your company needs to borrow capital to grow now, this is likely to reoccur at some stage in the future. And if your company opts to borrow capital and cannot repay the money borrowed in a defined timeframe, the chances of obtaining more capital will be significantly decreased. In the end, failing to make the changes your company needs to conserve capital could see your business, like many others, grow itself to death.

Christopher Witt spent 15 years was an executive with AT&T, Telstra and Motorola, before co-founding Kalori Group Investments, a private equity investor, in 1998. He is founding Director of the Centre for Innovation & Entrepreneurship at the University of New South Wales, a Fellow of the Australian Institute of Company Directors and the Director of the CEO School, Australia’s first training and mentoring school specifically designed for CEOs, entrepreneurs and high-end executives, which starts in October in Sydney. To enroll or to learn more about the CEO School, and follow Chris Witt’s CEO blog visit www.ceoschool.com.au, or follow CEO School on Faceboook or on Twitter @CEOSchoolAust 31

MARKETING STARTUP BUZZ

Starting up with a buzz Every startup needs marketing, but not all have the budget they need to make a splash. The advice in this story will help your new company to get noticed, fast — even in its earliest days. STORY BY Natalie Apostolou

hen Andrew Birt was studying for his Masters in Entrepreneurship at Swinburne University, he noticed that while his classmates had no shortage of brilliant ideas, they always stumbled when it came to marketing them. “There are lots of great coders [computer programmers] working in the backend behind a great concept but getting that concept, out there to your audience and getting customers onboard is the biggest hurdle,” he says. Birt, who had always worked in marketing, saw the opportunity to focus on providing marketing advice exclusively to start-ups, launching StartUp Marketing in 2009. “Right in the middle of the recession, yes, but startups are more likely to start in a down market,” Birt explains. More recently, Birt launched a specialised micro venture capital (VC) fund for Melbournebased Web startups called AngelCube. “We’re focused on nurturing and supporting Melbourne’s entrepreneurial tech community and helping founders to bridge the gap between great idea and great company,” Birt says. On par will global VC trends, the group offers not only seed funding, but also office space, introductions to Australian and international investors and, crucially, mentorship and marketing. Birt and his colleagues started AngelCube with the knowledge that funding alone is not enough to get even the greatest concept or technology off the ground. Click PR consultant Vuki Vujasinovic agrees. 32

SEPT 2011

“Startups and small businesses should treat PR [public relations] as one of their most important avenues for communication. Particularly in the early days, budget for expensive advertising can be hard to justify. However, putting some time and money into a cost-effective, dedicated PR campaign makes a lot of sense.” Birt also practises what he preaches; when the AngelCube incubator was soft launched in July, he used a simple pre-launch marketing method that he shares with clients. The AngelCube site was launched with a basic landing page, allowing interested parties to leave their address. Birt did a little bit of PR in startup-specific press and a lot of direct talking to customers. “In six weeks, which was by the time we officially launched, we had 500 people on the database,” he says. “Driving your own audience to your database is priceless — to have acquired those names by other means would have been very costly,” he adds. The first round of funding applications was open until the end of August. The projects that get selected will get up to six months’ of in-house mentorship and $20,000 in return for 10 per cent equity in the company. On the marketing side, startups in the AngelCube accelerator program will get guided in the art of pre-launch marketing. The AngelCube team will design a campaign that creates “mystery and excitement about the project”. “Getting the messaging right is essential,” Birt advises, adding that even the initial landing

page needs to capture the tone and energy of the venture. “Ensuring that the text is right and it makes sense to the target audience is key,” he states. For Web-based startups obviously excellent Web-based marketing should be part of the market proposition. The big mistake many companies make, Birt notes, is that they use social media as a broadcasting tool rather than a listening tool. “I advise that you listen first. Invest time in listening to your potential customers and understand the market and the audience. The two-way aspect of social media and marketing is the most amazing thing that couldn’t be done before,” he notes. He adds that being all over social media is not the right strategy; choose your communication channel wisely. “Balance your time and exposure on social media. Facebook may not be particularly helpful for business-to-business-oriented organisations, but Twitter and LinkedIn may be the right strategic fit. Identify your core audience objectives and concentrate on getting the voice right,” he advises.

Re-booting the buzz In the digital economy, where everyone is looking to get in on the ground floor of the next Facebook or GroupOn, startups tend to naturally gain attention — if they are positioned correctly. Creating a buzz at the start of company’s life is often hard work on a limited budget. “Success happens in stages. You don’t

MARKETING STARTUP BUZZ

really go from a tiny company to getting ads on TV,” Birt says. He advises to invest in the brand and its positioning for the get-go and “worry about the first few hundred customers, rather than the first ten thousands”. In terms of fiscal investment in marketing and PR, Birt says that dedicating $3,000-$5,000 in the early days is a good start. “This gives you a budget to test the market and see what works — anything less and you are not testing the market effectively.” Established tech incubator ATP Innovations knows that marketing and PR for technology startups is not normally a strongpoint. With funding often tight, the startup must clearly define its business objectives and map these against available resources before embarking on any marketing or PR activity, advises ATP Innovations Client Services and

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MARKETING BUZZ Marketing manager Sally Katic. “Startups can focus too much on the technology and not enough on the problem that they solve and who they solve it for. A clear message helps define a clear niche. The aim is then to build reputation and credibility within that niche,” she says. While there may be many business objectives, it is best to choose one area to focus on such as attracting investors, customers, or business partners. “This will help draft a clear key message that reflects the ‘brand personality’ the company is trying to build and ensure all targeted activities work towards a unified purpose,” Katic adds. On the PR side, Katic says that agency costs are often too high from the outset, so startups must look for innovative ways to create the required buzz. “Finding people and organisations that can assist and benefit at the same time is ideal. It may be using marketing students who are looking to build a portfolio or marketing organisations that benefit from association with the startup,” she suggests. Vujasinovic counters that “partnering with a boutique or specialist agency will also allow you to focus your time and energy on running your business, and let the experts take care of promoting it.” [Vujasinovic runs a boutique agency – Ed] He adds, however, that while it’s hard to match the results an agency will get you and the media relationships that they have, it doesn’t mean you can’t do some basic PR yourself. “Your first step should be honing in on the key messages you want stakeholders to remember about your brand. These should be the focus of any outreach, whether it be social media campaigns, pitches to journalists, or marketing efforts. Keep your pitch succinct and to the point, and use this contact to strike up a conversation. You’ll soon see your name in the spotlight,” he advises. Birt says that startups need to become adept at in-bound marketing, the art of getting customers to call you. For his clients, StartUp Marketing leverages off the fact that people are on the Internet all day, so they drive buzz by search. “If you are number one or two in search rankings it gets customers to you,” he says. While less tangible or Web-based services are best suited to online marketing and social media in addition to traditional media, Katic advises that it is best to think about what medium showcases 34

SEPT 2011

HypoMon (a nighttime hypoglycemia monitor for children), marketed itself by forming partnerships with specific industry bodies and special interest groups.

Launch local, pitch global

“Balance your time and exposure on social media. Identify your core audience objectives and concentrate on getting the voice right”

your product or service best. “Anything visual can and should be used to your advantage. Some products are suited to television and this is anything that is tangible and can perform an action. You can generate interest around such products through television publicity, a DIY video or Video News Release (VNR) that you may broadcast on YouTube, stage demonstrations at trade exhibitions, or via guerilla or street marketing, special events and media briefings,” she says. A former ATP client, Marathon Targets, used the DIY video approach and demonstrations to great marketing effect and secured a $50 million contract with the US Military for its robot-based live-fire training smart targets. Another client AIMEDICS, makers of

While many startups launch with domestic ambitions, the demands of growth and the reality that most venture capital funding is more readily available overseas means that keeping one eye on international opportunities is wise. Maintaining an international perspective also helps when thinking of selling the company or growing through a merger. In media and marketing terms, broadening exposure internationally is invariably a bonus. “We live and work in a global community, and this is particularly true of the way the media works. A small mention in a local blog can be quoted within hours by the biggest media outlets in the world. If your company is doing something truly innovative locally, don’t be surprised if it gets the attention of the global media,” Vujasinovic warns. He adds that if raising capital is on the agenda, particularly in a specific part of the world such as Silicon Valley, then spending some time talking to the key media in that part of the world is essential. When it comes to capital raising, Birt suggests that marketing must be pitched to communicate the sentiment of the company in addition to its achievements to date. “Potential investors or buyers want to see the journey that you have taken your company on, from embryonic stage to the next level. You have got to market that story effectively,” Birt emphasises. He also advises that startups should keep a private mailing list of interested parties and observers of the company from its inception and keep it regularly appraised as the company grows. These passive observers may become your next investor or owner. Vujasinovic, who works with successful startups including Kogan, BizzBuzz and Freelancer. com, adds that when you reach that point in your startup’s lifespan where you are looking to sell, you should work closely with the executive team, stakeholders and communication team, whether internal or external, to make sure that the message is getting across to potential buyers. “If your business has been building buzz since day one, and has been forcing the public to stand up and take notice, there’s no doubt that it makes for a more appealing acquisition,” he says.

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MARKETING SOCIAL ENTERPRISE

The Do-Good Revolution

A new breed of entrepreneurs is going beyond not-for-profit models with businesses aimed at funding good causes

STORY BY Natalie Apostolou

SEPT 2011

new wave of Australian entrepreneurs is putting their money where their social conscience is. â&#x20AC;&#x2DC;Social venturesâ&#x20AC;&#x2122; are rising up in every sector and getting straight to the heart of their intended audience, governments are taking note, while specialist venture capitalists are following suit. In the US and UK, the social enterprise sector has been booming. According to Social Enterprise UK, a body set up to promote social ventures, over 62,000 of these new do-gooder outfits have set up shop. In Australia, the concept has taken a little longer to gain traction, but 2011 has seen the emergence of this new business subset with

MARKETING SOCIAL ENTERPRISE

“A social enterprise is defined as a company or venture that achieves a core social or environmental mission using business methods.”

a philanthropic edge. Last month, the federal government announced that it would provide $32 million in seed funding to Social Enterprise Finance Australia (SEFA) and to Foresters Community Finance to offer tailored financial products and loans to meet the needs of social enterprises.

What is a social enterprise? A social enterprise is defined as a company or venture that achieves a core social or environmental mission using business methods. It is not a charity, but it often produces charitable effects. Typically, it is a commercial operation that turns profits over to a cause, or functions to help benefit society or the greater good in some way. Social enterprises rose in the wake of the GFC, which caused so many job losses and unexpected career changes that it prompted some people to question the purpose of their work, the value they derive from it and maybe seek an alternative way. The rise of ‘green’ thinking has certainly helped this sector flourish. No longer just the bastion of hippies and environmental activists, the mainstreaming of sustainable living is allowing new social enterprises to build a more equal, sustainable world by applying market-based strategies to tackle social problems. What is common to these diverse organisations is that their marketing messages are usually highly effective, as they strike at the heart of their audience. Their impact is even more impressive, as these cash strapped outfits usually have to resort to innovative ways to get their message out there and that usually occurs at the grassroots level. “We’re entering an unprecedented time of change that is the result of the intersection of a number of tectonic shifts in society,” claims Dave

Gravina, the founder of ethically charged, digital design and marketing agency Digital Eskimo. Gravina has been a pioneer in marrying social activism with a commercial sensibility and he believes the confluence of digital tools and a renewed sense of ‘giving back’ to the community have been the core factors contributing to the rise of social ventures. “The ‘digital revolution’ is colliding with and amplifying the ‘values revolution’, which is driven by people the world over seeking meaning in their lives via their work. This is creating a wave of new ideas and organisations we call social ventures,” he explains. He adds that the problems associated with climate change have forced commercial minded people to think about viable solutions. “We can’t respond effectively to the climate crisis without doing it fairly, so we are also in a period of increased demand for socially equitable solutions, many of which fall under the social ventures banner. If we’re going to make massive structural and technological changes to our societies, then they should be done while improving the lot of everyone, not just the wealthy and powerful,” he says. It is also a social shift, he believes, with more people actively looking for new ways to align their work and their values beyond the non-government organisation and not-forprofit models. Funding struggles in the not-for-profits sector invariably turn people off adopting them, so people have started to look for new models to try. “We’ve all seen just how effective and world changing modern adaptable businesses can be with companies like Google and Apple leading global commerce, and I think the social ventures are an attempt to utilise these commercial models to create positive social and financial outcomes,” he says.

The well of commercial kindness It is precisely this strand of thinking that led 22-year-old Dan Flynn to create Thankyou Water three years ago. Flynn was studying and doing some research on the global water crisis and stumbled on the fact that 900 million people don’t have access to clean water. He also discovered that Australians spend $600 million annually on bottled water. Something wasn’t right and he wanted to fix it. Thankyou Water, a new brand of bottled water, was launched with a group of his friends who tipped in savings and their time and resources to create a social enterprise. The aim of the business is to donate all profits from the sale of the bottled water to fund water projects in developing nations across Africa and South East Asia. After suffering every kind of calamity a startup can face, Thankyou Water has secured some very impressive media coverage and recently secured national distribution through retailer 7-Eleven. Most impressive of all, water projects are up and running in Cambodia. “Social entrepreneurship is still not as common here as overseas. We are essentially operating like any business and we cover all the same costs but our shareholder is a charitable trust,” Flynn explains. He and his team all still have ‘day’ jobs (Flynn works in a mobile phone store) and forgo a salary to make it work, but believe that this will soon change. While Flynn is the first to concede that the journey of Thankyou Water has been highly testing, he also says that finally making it work is the most satisfying experience — as an entrepreneur and as an individual who wanted to make a difference. Getting to that point has rested largely on a pitchperfect marketing campaign. “We work very hard at getting the marketing 37

MARKETING SOCIAL ENTERPRISE

Captain Do Gooder – mascot of www.good.do

right. Marketing, in our case, really is everything. At the end of the day, you may have a great idea, but unless you communicate that and take it to the people, it’s just a good idea,” Looking at Thankyou Water’s Website, with clean, bold lines and strong images, it is hard to believe that it has never had a budget for marketing. But a lack of funding has forced its hand at marketing innovation. Flynn’s team struck marketing gold a few months ago, when a campaign went viral and got picked up by mainstream media. The concept behind Thankyou Water has resonated with Gen Y, which is unsurprising, given no-one in the company is over 22. Facebook has therefore been a good conduit for building a community around the brand. Deciding to leverage its social media community support, Flynn called for fans to show their support for Thankyou Water with a short video clip and post it on 7-Eleven’s Facebook wall. The move was a cheeky way to get the attention of the retail giant which had passed on distribution a year ago. It worked. After 400 posts in one afternoon and the story getting picked up by radio and TV, 7-Eleven wanted to talk and is now a lynchpin distributor. “It wasn’t a threat, but we wanted to show that our concept was genuine and that our brand values actually meant something to our consumer base,” Flynn said. 38

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Flynn said that social media works particularly well with their type of social venture, but may not be for everyone. “Our community wants to know where their money is going and what it is doing to make a difference; they need to see the connection. People get skeptical about charity, and social media is the perfect way to show them what is being done with the funds,” he says. The site has regular posts from the villages where Thankyou Water funds have built wells for clean drinking water and the cause and effect is abundantly clear. Gravina says that the advent of digital media has been a massive enabler of change. “Digital technology creates opportunities for disruption across every industry. It enables paradigm shifts to occur more easily, and this is why it is often the digitally enabled social ventures that get everyone excited. Because they have the potential to scale, to be game changers and have a big impact on society,” he says.

Digital white knights Digital Eskimo had been creating campaigns for clients on crazy deadlines and low budgets with never enough time to apply to creative strategy. While working on the successful ‘Your Rights at Work’ campaign in 2007 and the ‘Raise the Bar’ campaign to support small bar reform in NSW, which both worked on similar IT platforms, but

took effort to re-purpose, Gravina thought that there should be an easier way. He researched the idea of creating a user friendly digital platform that allowed anyone who wanted to create a campaign for social action to just plug and play. Two years later, Do Gooder was born. The platform www.good.do was launched in July 2011 and has already attracted a slew of social activists. How does it work? “First you need an issue you’re very passionate about. As long as it is for the greater good, then we’re happy for you to run it on Do Gooder,” Gravina says. The site allows you to create a free trial account, set up your campaign Website with a catchy name, logo and colors, some information pages to explain the background and who you are, and then you add action tools like emailing politicians or calling company CEOs, depending on what you’re looking to achieve. “When you’re happy with it, launch it to the world and share it with your social networks via Twitter, Facebook and your email lists. We give all customers a free trial to take it for a spin. If they want to keep doing good on Do Gooder, they pay a small monthly fee, which varies depending on the plan chosen,” he explains. Costs start at $29 per month. The message behind Do Gooder is that the

MARKETING SOCIAL ENTERPRISE

new tools of communication and persuasion that society has created can be called upon to ask people to do so much more than consume stuff, he says “There are so many ways to use digital and social tools for positive change. But it must first come from an authentic place -– from people wanting to do good. Then you just need to use what works; humans respond to authenticity and social technologies allow us to be transparent and very real,” Gravina adds. Any successful online campaign requires a lot of time and work to test and refine, to code and deploy and Gravina knows that all that effort requires a serious budget. Do Gooder allows socially aware companies to get to the people, without being hemmed in by cost.

“The ‘digital revolution’ is colliding with and amplifying the ‘values revolution’.”

Gravina believes that the emerging social venture space is an exciting place to learn about what can happen when you’re willing to disrupt your industry. “Invest in ideas that have the potential to completely re-invent your sector. Be authentic and transparent at all times. Look for ways to make profit and positive change happen at the same time. I’d say look for the new ways of organising so that you can perhaps shed some of the older assumptions about how things have to be done,” he advises. Above all, Gravina says, question the purpose of your business. “If its purpose isn’t aligned to the people within and its customers and your broader community, then perhaps that needs to change.”

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Entries are closed FOR THE 2011 ActionCoach My Business Awards Has your business had a good year? Did you enter the awards? Do you feel like you’re on a winner? If you answered ‘yes’ to the middle question, then rest assured - the judges of the 2011 ActionCOACH My Business awards are hard at work reviewing your entry. Stand by for the announcement of finalists - five in each category in mid-September.

SEPT 2011

Are you coming to the awards night?

Awards for everyone

A big night out

In 2011, My Business is determined that any business, no matter how big, small, old or young, feels like it is in with a chance to win. To prove it, entries from organisations that we find have won other business awards — including our own — will be marked down by five per cent. We’re also offering a bonus five per cent for truly outstanding entries, especially those that make use of multimedia and social media to prove they really will go the extra mile to win.

Another reason to enter is our gala awards ceremony, to be staged in Sydney in October. Always a big night, the awards ceremony offers the chance to network with other entrants, meet sponsors and share the joy as winners take to the stage.

Why enter? The team at My Business are in awe of business owners: having the courage to put yourself on the line and test your vision and passion in the market is a praiseworthy effort. If you’ve already gone to that effort, popping in an award entry won’t be hard. It may also help you to achieve your other business goals, like growth and better profits. Past winners have certainly reported that the publicity they won through the awards, and the confidence that came with success, helped them to take their businesses to another level. So, why not enter your business? You may not win, but just compiling an entry will remind you of how far you’ve come and how much you have already achieved.

A new judging process This year’s awards will have a new, more detailed judging process. The first step will see the My Business team work with a panel of three business experts to develop a shortlist of five finalists for each category. Those experts will include My Business columnists, representatives of industry associations and people with special experience relevant to the award. An example of how this will work is our Best Corporate Social Responsibility award, for which we have already been in contact with local representatives of one of the world’s most visible charities. A member of that organisation will join us in the preliminary judging of that award. Round two of judging will see the finalists assessed by a panel comprising five new business experts, a representative of each category’s sponsor and the Editor of My Business. This panel will vote for the winners of each category. We’ll name some of the judges in the next two issues of My Business, so you’ll start to learn the identities of those you need to impress as the year progresses. Keep reading My Business to make sure you can craft just the right entry to catch their eye!

2011 ActionCoach My Business Awards

Categories Award for Best Medium Business

Award for Best use of Technology

Award for Best Start-up Business

The Best Medium Business will need to demonstrate innovation, growth and entrepreneurial flair, in a business with between 20 and 200 full-time-equivalent employees. What the judges will look for The Best Medium Business of 2011 will stand out by: • Demonstrating measurable growth; • Showing how it delights customers; • Proving that it stands out in its field ... or even represents something entirely novel; and • Demonstrating how its larger scale translates into more sophisticated systems, processes and execution.

The Best use of Technology award will go to the business that can best show how technology improves its business efficiency. What the judges will look for The Best user of Technology for 2011 will stand out by: • Measurable improvements in either profitability, process efficiency and customer service — or all three — as a result of recent investments in technology; • Demonstrating the formulation and execution of a technology strategy; and • Innovating with technology.

For new businesses, the Best Start-up category will celebrate the best beginners, based on creativity, growth and overall business execution What the judges will look for The Best Start-up for 2011 will stand out by: • Impressing judges with a strong business concept; • Proving early success; and • Demonstrating solid growth plans.

Award for Best Employer

Award for Best Employee

Also new for 2011, this category will reward an organisation that makes the most significant investment in people, as shown by the business outcomes those investments produce. What the judges will look for The winner of the Best Employer award for 2011 will stand out by: • Providing employee testimonials; and • Demonstrating measurable business outcomes that result from their workplace practices.

The Best Employee award can be won by a self-nominated, peer-nominated or managernominated employee whose contributions to a business are demonstrably beyond the call of duty, while also producing outstanding results. What the judges will look for The winner of the Best Employee award for 2011 will stand out by: • Providing testimonials from colleagues and customers describing their achievements; • Demonstrating substantial achievements in the workplace; and • Sharing a personal development plan that illustrates commitment to their employer.

The GIO Award for Best Small Business

SEPT 2011

The Best Small Business will need to demonstrate innovation, growth and entrepreneurial flair, in a business with between one and 19 full-timeequivalent employees. What the judges will look for The Best Small Business of 2011 will stand out by: • Demonstrating measurable growth; • Showing how it delights customers; • Proving that it stands out in its field ... or even represents something entirely novel; and • Surprising judges with clever execution, cunning marketing and strong products.

Award for Best Growth Strategy

Award for Best Corporate Social Responsibility

Award for Best Business Leader

This category celebrates the success of a business’s plans and strategies, by measuring the results generated by new strategic initiatives. Winner selection will be based on innovation and results. What the judges will look for • The winner of the Best Growth Strategy award for 2011 will stand out by: • Demonstrating strategic thinking; • Achieving measurable business outcomes as a result of the strategy’s execution; and • Demonstrating the novelty of their strategy.

A new category for 2011, the Best Corporate Social Responsibility category will reward the business that best gives back to the community and/or the environment. What the judges will look for The winner of the Best Corporate Responsibility award for 2011 will stand out by: • Proving positive change has resulted from its Corporate Responsibility efforts; and • Demonstrating organisational commitment to its chosen cause.

Another new category for 2011, the Best Business Leader will be an entrepreneur or manager who has demonstrated outstanding leadership that has measurably improved the business they work at or own. What the judges will look for The winner of the Best Business Leader award for 2011 will stand out through: • Acknowledgement of their leadership role from colleagues and peers; • Demonstrating the results of their leadership; and • Articulating an inspiring leadership philosophy and style.

MARKETING

How to measure sales success E

Measuring the success of salespeople means much more than just ticking off a target. Sue Barrett explains the metrics and techniques that offer a better way to assess sales effectiveness.

Sue Barrett is a sales expert and coach, sales training provider and facilitator, writer, business speaker and adviser and entrepreneur. Sue is the founder of Barrett, specialists in assisting business people and businesses build high performing and profitable sales teams. Sue has worked with hundreds of Australian companies on their sales strategies, pitches and techniques. www.barrett.com.au 44

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very business owner appreciates the importance of sales in generating income, but successfully identifying and retaining high-performing sales talent often eludes many organisations. In today’s business climate, it’s even more important to attract and retain good salespeople, as products quickly lose their competitive edge and sales success becomes dependent on the capabilities and performance inputs and outputs of salespeople. However, before we start thinking about the type of salespeople we need and how exactly we determine whether our candidates are the right fit, we must develop a sales culture. By setting a sales blueprint, we can see what qualities, skills and characteristics we need specifically for our sales role. When tackling your ideal salesforce blueprint, the first thing to do is review your current business and sales strategy, and ask yourself the following questions: • Do you have the right strategy in place? • What has changed over the last 12 months? • How has your client mix changed? For example, are your key accounts still key? What emerging markets have come into play that you need to be in? and • Does your tactical marketing plan still support your sales and business strategy? The next step is to review your current sales team. Identifying any gaps and weaknesses will give clear direction as to changes you need to make to achieve the right sales team structure. Do so with the following questions: • Is your current sales team ‘fit’ enough to deliver your strategy? • If not, can you get them to the standard where they will be competitive? • If the answer is ‘no’, then what type of salesforce do you need? • Do you need more reps in the field, more people on the phones, or do you need a different type of sales force? • In an ideal world, what would your salesforce look like? How would it function if it were to deliver effectively on your sales strategy? By asking yourself these questions and

reflecting on the current state of play in your market and business, you can easily imagine what your sales team could be like and start to see where the potential for improvement lies. The market and how you intend to apply your strategy will also help dictate the kind of salesforce you need.

Roles and responsibilities Now that you have painted a picture of your sales culture, we can look at your sales roles. This is the time to strategically think about how to measure the success of your salespeople. It’s important to remember that not all sales roles are the same and not all businesses require the same qualities and skills from their salespeople. What works for some, won’t work for others, so it’s important to follow this process and take the time to employ the right fit for your business. If you wanted to (and have the time), you could sit down for at least four weeks and complete hundreds of sales assessments and there would still be more to learn from the resulting mountain of data. This over-abundance of sales assessments can be confusing, because they are not all the same. If you don’t know what you want to measure, it will make looking for an effective sales assessment tool that much harder. To determine what to measure, look at the attributes you need for your salesforce. Go back and revisit your sales blueprint. Check out the particular characteristics that matter to your specific sales roles. Four main areas should be acknowledged: • Cognitive abilities — verbal and numerical reasoning, conceptual reasoning, critical thinking, mechanical reasoning etc; • Personality — everyday preferences, personal and learning styles, self management, team orientation, ambition, etc; • Motives and values — what makes people happy at work, what drives them, what makes them unhappy; • Coping and derailing behaviours — learned behaviours and attitudes that can adversely affect sales and leadership performance when under pressure or operating from a fear or frustration.

MARKETING

Once you’ve decided what’s paramount to your sales role, you then know what to ask yourself about each candidate to find out whether they fit with your overall sales culture. Figuring out why people sell is an important element. We need to know what motivates our potential salespeople to sell. This could include a variety of reasons and you will need to determine what motives, ambitions and goals are behind these reasons. Your key question will, of course, be: will this person sell well? To answer this, look at their attitude and mindset. Look for signs that suggest they’re not hesitant and possess accountability. How much energy and drive to they have? Does this fit your newly-defined sales culture? The right candidate may rate highly in factors that signify that they may sell well but, of course,

it remains essential to determine if they have the right skills, knowledge and experience in selling. It all comes down to how a person will sell and how well they will do it. They may have come from a sales culture that is quite different to your own and therefore may have a different style of selling to what you prefer. We need to assess how a person will sell and to do this, we need to look for what type of ethics they possess and what learned behaviours they have adopted. There is never a ‘one size fits all’ approach. Unfortunately, there is no single sales tool that can answer all these questions, but If you know what you want to measure, it will make looking for an effective sales assessment tool that much easier. There are many assessments out there, manay of which are quite useful in helping us predict sales performance. By following the steps of determining your salesforce blueprint and

store it. access it. use it. Documents, emails, meetings and conversations, all in one place. Woohoo!

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working out what you want to measure, you can then go and seek out the right assessment that will make the selection process less confusing than it needs to be. Not only will it be less confusing, but you are then on the right track to picking the most accurate and profitable salesforce for your business. Getting it right when it comes to hiring your sales team is critical. A successful salesperson will not only enable your organisation to ride out the economic uncertainty, but will ensure you are ready to seize the opportunities that present during the recovery. As your sales teams are the primary interface between your organisation and your clients, it’s only when you get that interface right that you will achieve true competitive advantage. Remember, everybody lives by selling something.

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TECHNOLOGY

Make a connection My Business Technology Editor Lia Timson explains how to network your office, with or without wires, so you can share information with your team – or the world. A network attached storage unit

STORY BY LIA TIMSON

s a small business starts to expand, so does the demand for staff access to its data and computer systems. All of a sudden, a couple of standalone PCs or a handful of machines networked through a home-grade router is no longer a business proposition. In this article, we look at what you need to consider when implementing a business-grade computer network at your premises so that you can improve efficiencies and gear your company towards growth.

First connections Computer networking, like any other business improvement, needs careful planning. Linking all your computers and giving staff flexible access to centralised files may sound like enough of an objective, but experts say there is more to planning a network than that. Ryan Parker, Managing Director of Netgear, and Maurice Famularo, Marketing Director at D-Link, have advice for growing businesses. First, they suggest making a list of the business applications — accounting, industryspecific and office programs — that need to be accessed through the network. This will provide an understanding of not only the networking configuration, but also software licensing and possible additional installation requirements. Next, try to envisage how those applications will grow with the business. Will they be needed in the warehouse? Will guests need casual access in the meeting room? Will additional employees be needed in peak periods? Will further terminals and licenses be necessary? “If you just want to share MYOB, you can 46

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use its cloud (online) service,” says Parker. “Cloud is a low-cost way to expand access to all sorts of applications. “But if you have a real need for file servers, and if you have a poor Internet connection, you may also want to think about backup or network attached storage (NAS).” Parker cites the example of a graphic design business that needs to give in-house artists constant access to large files, but doesn’t want them demanding that capacity from a central server that also runs email and accounting applications. In this case, a NAS device could house the image files, separately to the server running the rest of the business.

Wireless or wired? With Wi-Fi networks so commonplace these days, one could be forgiven for assuming they are replacing wired networks. In fact, a wired local area network (LAN) and a wireless local area network (WLAN) co-exist in most companies to deliver on different requirements. A LAN is an internal network installed in an office, be it over one level or more, a campus or any other limited area. It can be wired — usually using copper Ethernet cables or sometimes fibre optic cables — or wireless, using WiFi technology. Both wired and wireless are commonly delivered by one device. While a wireless network is ideal for allowing access to laptops, smartphones and tablets around the office, a wired network is faster and more reliable for transferring large files, networking multi-function or industrial-scale printers and connecting

computers over a longer distance — say, office to warehouse, workshop to reception, or offices on different floors. Famularo suggests a site survey be undertaken before you finalise your networking plans. This allows an understanding of the visible and invisible physical limitations of the site such as distance, layout, conflicting Wi-Fi networks, radio signal and microwave link interference, and roadblocks from construction materials such as steel frames and roof. “A good site survey is critical. If you have a maximum of 10 people in one large room, wireless would be fairly good, but if your warehouse is 20 or 30 metres from reception or the workshop, you may need to run Ethernet cables or install another access point like a repeater,” Famularo says. He cites the example of a spray painting shop that recently wanted wireless access to a factory out the back, but which already suffered constant wireless interference, even causing computer screens to flicker. An audit and a few tests determined it was the metal from all the cars as well as the building construction that caused the interference, to a point where not even an Ethernet cable was advisable due to its copper wiring. “The solution was to run fibre optics to get the network to the back factory,” he says. In addition to distance, site layout and conflicting networks, Famularo suggests taking into consideration the number of people needing access in each location, other machinery used on the site, and the type of racking used in warehouses and factories.

TECHNOLOGY

“A lot of small businesses are working with consumer products, but consumer gear has limitations and a business-grade solution offers better wireless range, faster speed and expandability.”

Consumer or business-grade?

Cloud

It is safe to say consumer-grade routers and modems have come a long way and today can deliver adequate networking functions to home networks and small businesses. However, if you envisage your business growing and/or have specific requirements such a an industrydedicated application, or work with large files, then you need to be aspiring to a business-grade solution that delivers a robust infrastructure. Most vendors, including D-Link, Netgear and NetComm, provide products and services to both markets, but they all agree planning and consultation with themselves, an integrator or an Internet service provider (ISP) are the best way to address a growing business’s requirements. “A lot of small businesses are working with consumer products,” says Parker, “but consumer gear has limitations because it is not designed for business use. A business-grade solution offers better wireless range, faster speed, expandability, advanced security controls, even content filtering and bandwidth control.” Some vendors recommend a UTM appliance be installed as part of the new network. That is a Unified Treat Management box, which houses security software such as firewall, anti-virus and anti-spam applications, so that the network is protected at the perimeter from incoming threats. It can also house content-filtering applications and internet-access controls to, say, limit employee access to certain Websites.

Consider how your business is changing and what applications you are likely to be housing in the cloud in the next few years before investing in new networking equipment. Is your customer relationship management (CRM) application already in the cloud? Your accounting package? What about your regular business-grade backup solution? Do all your employees use a cloud email service such as Gmail or Hotmail? There is a huge movement towards cloud services at present, including online office applications and email exchange, so thinking about where you want your business to be in a few years time will help you plan ahead. New network cloud services are also starting to appear. LogMeIn recently launched a virtual private network service in the cloud. VPNs work in the same way as LANs, but create links between cities and/or countries. They are common among large enterprises that can afford to rent private cables from telecommunication providers in order to link distant offices. The new LogMeIn Hamachi product, however, claims to allow anyone from consumers to business users to create a new network through VPN.net to connect users in different locations. It requires the download of the Hamachi software onto the proposed networked Mac or Windows computers and promises little need for

A unified threat management device

configuration. Additional PCs can be added by allowing them access to the network with a company-created login and password. Talk to your IT consultant or systems integrator about security parameters for a network in the cloud and remember that your networking requirements will change if your employees need more access to the Internet than they do to internal file servers.

Make the most of what you have Remember the old adage about people only using a fraction of the features on their video recorder? The same is true of networking equipment, says Parker. “You can spend a lot of money on networking and still only use 10 to 15 per cent of the features if the gear is designed for large enterprise, but most vendors now have small business and medium business products with the right specification at the right price,” he says. D-Link’s Famularo suggests companies also look at what they already have as part of planning the network. Simple things like enabling users to access shared folders on each other’s computers through existing Windows software, Apple home sharing or a separate device such a media playerequivalent or a separate hard drive. “If they are creating a work environment that is very similar to home, they can replicate it themselves in the office, but it becomes more complicated when you have specific software packages that need to run on a server,” he says. In either case, consult your systems integrator, your ISP and/or vendors’ pre-sales call centres before you start spending money. “But don’t go out and buy the cheapest consumer product and expect it to grow with your business,” adds Parker.

TECHNOLOGY

Take a tablet to improve business

Thinking of joining the tablet revolution and adopting them for your business? Here are a few things to consider before deciding which one to implement.

STORY BY LIA TIMSON

iPad 2

f you are thinking of adopting tablets in your company, it pays to think about how they will align with your business proposition and your current technology setup. Firstly, what will the tablet be used for? Different applications work better on different devices. The operating system your business is built upon should also be considered. This includes whether you rely on Windows and would like to integrate the tablets with your back office, or you prefer BlackBerry or Android for your mobility requirements. And if your business depends on Flash (say, for your Website), you may have to go with a tablet other than the iPad. Alternatively, you may like to consider HTML5 as a Web design tool.

Here at My Business, we haven’t yet seen anything better. Hype aside, the design, the useability and the thousands of dedicated useful apps are hard to beat. If you already use iPhones in the business, you will know what we mean. If you envisage a lot of video conferencing with your team members, the iPad/iPhone Face Time feature should be included in your consideration list. Some large companies are issuing the device to board members to cut down on printed documents, something the Prime Minister Julia Guillard has also endorsed — her briefing papers are now served onto her iPad. From $579 to $949, depending on memory and 3G capability. www.apple.com.au/ipad

Samsung Galaxy Tab 10.1 Proof this is the next best thing to the iPad is on offer in the form of the lawsuit Apple has filed against Samsung. Courts in Australia and Germany have upheld an injunction preventing the launch of the device here and in Europe for the moment. Early reviews of the tablet are

SEPT 2011

very positive. It is slightly bigger than the iPad (10.1-inch screen compared with 9.7-inch) with higher screen resolution (1280x800 instead of 1024x768), but the other specs are comparable. The main difference is the operating system; the Galaxy Tab is built on Google Android. This means native Google apps such as Maps, Gmail and Google Docs work beautifully on the device. It was priced at $729 before sales were halted. www.samsung.com.au

Other Samsung Galaxy tablets Samsung also makes a cheaper, smaller version of the tab, with a 7-inch display and says an 8-inch model is coming. Here at My Business, we dislike small tablets that can’t decide whether they want to be a large smartphone or a real tablet, but it depends on what you want to use them for. The Galaxy Tab 7 is also built on Android. It was $299, but the company’s information line says they are hard to get at the moment. www.samsung.com.au

TECHNOLOGY

iPAD case study

lobal student agency Information Planet provides information on courses, visas and accommodation to people from Latin America and Europe hoping to pursue studies in Australia, New Zealand and Canada. Its clients — youngsters and their parents in 13 countries — used to have to visit one of its offices to meet with a sales consultant. The the advent of tablets gave its CEO, Mauricio Pucci, an idea. “As cities are growing and people are getting busier, it’s harder for mum and dad to come to our office. The iPad allows us to send salespeople to their homes with our database,” says Pucci. The purpose-built database contains videos of potential schools and destination cities, comparison tables for courses and travel prices, and a myriad of tools to help paint a picture of the proposed trip. Pucci did not consider any other tablet nor a laptop for the job, because he felt his business proposition was aligned with the iPad’s aspirational qualities. “In our business, we talk a lot about ‘the dream’. The dream of travelling and being overseas, learning new things, and the iPad is part of that. When you click on the iPad and invite people to share in the information, the word ‘sales’ goes away,” he enthuses. Pucci has so far bought 10 3G-enabled iPads used by sales consultants in homes and in student social gatherings. He claims sales have increased as a result and plans to have 50 devices by next year to complement his fleet of Apple computers. “A lot of our business is based on the simplicity of the Apple promise,” he says. Information Planet CEO Mauricio Pucci

BlackBerry PlayBook

Others

Another 7-inch tablet, this time catering for big fans of BlackBerry smartphones. Like the iPad, it can connect to your phone’s Internet connection. This is an advantage for businesses that use the BlackBerry server for emails and contacts, as the PlayBook piggybacks the same system (See page 52 for a brief review of the PlayBook). From $579 to $799. www.blackberry.com/au

experience. However, we know many businesses have been waiting for Windows tablets to come to market to integrate with existing systems. If this is your prerogative, insist on testing some devices. The upcoming Windows 8 operating system — from what we have seen so far — should make Windows tablets much better. From $349 to $899. www.acer.com.au

Acer

Motorola Xoom

Acer has a number of tablets on the market. There’s the 7-inch A100 and the 10-inch Iconia Tab A500, both with and without 3G, all built on Android. We weren’t that impressed when we reviewed it in May, but the specs are comparable if not better than some of its competitors. The company also markets a Windows 7 tablet, the Iconia Tab W500, which has an optional keyboard that makes it look like a laptop. We do not recommend Windows tablets as a rule — frustratingly, Windows is not built for a tablet

Early reviews of the 10-inch Xoom pitch it favourably against the iPad. And it has extra features, including compatibility with Flash and HDMI. It uses Google Android as the operating system. Now, remember that Google is buying Motorola’s mobility division, so this tablet might yet end up a Google-branded device with further enhancements. $798 for Wi-Fi/3G version. www.motorola.com.au

There are other tablets already on the market or coming soon. The 7-inch Dell Streak is available now, while its Windows-powered business tablet is expected in October (www.dell.com. au). Tegatech has a range of business-dedicated tablets, ranging from devices for clinical environments through to touch and rugged versions (www.tegatech.com.au). Sony is working on two tablets — a 9.4-inch to compete with the iPad, and a 5.5-inch device with two screens that form a bigger one when opened. Expect them in October (www.sony.com.au). Toshiba is also in the tablet market, and Olivetti has promised to enter it soon.

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Just add customers.

Limits ®

TECHNOLOGY

Making the NBN connection What will you need to do when the NBN comes to your home or office? We’ve learned what’s in store to help you prepare.

ork on the mainland parts of the National Broadband Network (NBN) has commenced. If you live in one of nine nominated locales around Australia (see ‘Confirmed NBN sites’ below), you may be able to connect in under a year. If you’re offered the chance to do so, now or in the future, here’s what Steve Christian, Head of Network Operations at NBN Co, says will happen. “If a customer end user places an order with a chosen retail service provider (RSP), that retailer will book an appointment with an installer who will install the ‘drop cable’, which goes from the side of the street or a telephone pole onto your premises.” Christian said this part of the process will be very similar to having Foxtel installed in your home, even down to the installation of a new box in your home or office. That box is called a network termination device (NTD) and will offer you two phone sockets and four for data. Just what service you receive will be up to the RSP you decide to work with, because NBN Co is only a wholesaler and all the NTD does is provide a connection the retailer can use. RSPs will be the same phone companies you deal with today, so expect deals from the likes of Telstra, Optus, iiNet, TPG and so on. Your RSP will supply another piece of equipment that will connect to the NTD to bring your NBN connection to life. For the next few months, NBN workers will also install your RSP’s equipment to enable your service. In the future, your RSP may perform the installation of the NBN drop cable and its equipment. Christian said NBN Co wants to avoid a situation whereby you need to be at home twice — once for the NBN installer and a second time for the RSP to do its thing — which is why some RSPs will be able to install the whole lot.

Business waits The picture for businesses is less clear, because NBN Co’s current services are designed for home and micro-business users only. More complex business services will be announced shortly. Christian said if you have a home-based business, the processes outlined above will apply. If your business operates a PABX or a local area network that uses more than just the equipment provided by an RSP, Christian cannot yet advise just what an NBN installation will entail. He did, however, predict that PABX vendors will offer an extra device that sits between the NTD and the PABX so you can retain your equipment and your phone numbers. Installation of that device will, he feels, need to be carried out by whoever you use to service your phone systems. That will necessitate a second visit, but Christian said that as businesses nearly always have someone on the premises, this will be less of a hassle than it would be for home users. 50

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Network terminating devices NBN Co will install in Australian homes and small businesses

STORY BY Simon Sharwood

Confirmed NBN sites

NBN Co, the body constructing the NBN, has confirmed the following sites and dates for the next phase of construction:

Location

Preliminary site works start date

Coffs Harbour

August 2011

Armidale NSW

August 2011

Townsville Qld

September 2011

Kiama township and Jamberoo NSW

September 2011

Toowoomba Qld

October 2011

Gungahlin ACT

October 2011

Riverstone NSW

November 2011

Goodna/Springfield Lakes

November 2011

Aspley- Brisbane metropolitan area

December 2011

The company estimates that services will be available in these locations around 12 months after construction commences. NBN Co CEO Mike Quigley announced these sites early in August 2011 and also said, “Our intention is to release a 12-month schedule, including new rollout sites, in the near future.”

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Ann’s top tips for start-up importers a means of offering a cheaper yet still natural and high-quality outer-wear alternative for my customers. The feedback has been very positive,” she added. But launching a small importing business with manufacturing in Asia has not always been an easy road for Ann. “I wish I had attended more events like the Import Export Show and courses on importing as well as Asian countries’ culture and business practices when I started my business. The cultural differences between Australia and Asia really add a unique dimension to being a small business importer,” Ann explained. “Getting used to the different cultures can be quite challenging. Asian cultures tend to say ‘yes’ out of politeness. One way to manage this is by asking lots of open-ended questions and being very precise in your requests. I have also found that it is often easier dealing via email due to language differences. But as a general rule, the more you can visit your suppliers, the

1. Make sure there is a market for your products — analyse what consumers want, the adequate price point, the delivery method, quality etc. 2. Seek help! Visit government departments, your suppliers’ country consulates and attend courses and events like the Import Export Show — that will help put you on the right track and provide you with tips and contacts.

more enhanced your relationship will be, and it becomes easier to work together on issues as they arise. “Another aspect to consider is your timeframe for deliveries. Chinese New Year and other public holidays that don’t necessarily exist in Australia will significantly affect your deliveries. Plus, at times there can be power cuts in certain country

3. Never rest on your laurels — be diligent and always keep the quality of your products top of mind. 4. Think about the logistics behind the products such as warehousing and freight forwarding.

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regions, which means your manufacturer won’t be able to deliver on time. “Also, I found that as Australia is such a small market compared to Europe or the US, our requests tend to be put at the back of the pile. So your timeframe needs to include your suppliers’ busiest time of the year so you can fit in around them and get your products on time,” she said.

EXPERTS ROBYN ANDERSON

“Management must approve leave before employees arrange a break.”

Don’t take leave of leave

ith the winter months behind us, as a business owner you can now turn your mind to thoughts of a relaxing end-of-year holiday. However, before you do so, ensure your business has laid down the ground rules for employees taking annual leave. I hear many business owners lament that their employees go ahead and book holidays and simply assume it will be okay with the business. This can then leave a business owner feeling like they have to allow the leave, regardless of whether it suits the business or not. Don’t let this happen to you. Instead, manage leave entitlements in order to: • Reduce the potential for employee stress; • Provide employees with a break from the workplace to recuperate, spend time with their families and restore their energy; • Effectively schedule annual workflows; and • Avoid unnecessary leave overlaps. Further to this, effective leave management provides employees with a balance between their work, family and other life commitments. Research indicates that employees who regularly access leave provisions are more productive; more motivated and are less prone to falling ill.

NES entitlements Employee annual leave entitlements are governed under the National Employment Standards (NES) and mean that all employees (except casual employees) get paid annual leave based on their ordinary hours of work. An employee is entitled to: • Four weeks annual leave for each 12 months of service; or • Five weeks annual leave for some shift workers for each 12 months of service. Businesses should also ensure that their industrial award, enterprise agreement or any other contractual arrangement does not provide for additional annual leave.

Robyn Anderson is a Fellow of Australian Human Resources Institute and the Managing Director of HR Navigation Australia, an HR/ workplace relations consultancy specialising in providing outsourced HR manager services to small and medium-sized businesses. To contact HR Navigation, call 1300 669 747 or visit www. hrnavigation.com.au 60

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How much is the employee paid? Under the NES, an employer must pay annual leave at the employee’s base rate of pay for their ordinary hours during the period of leave. However some awards provide for special rates of pay that include industry allowances etc. Most awards also provide for the payment of annual leave loading. Industrial awards and agreements may provide for annual leave to be paid at a higher rate than required by the NES (for example, payment of annual leave loading in addition to the ordinary rate of pay).

Minimise disputes by creating rules Many employers and managers will be familiar with the employee that simply informs them that they are taking

leave from a certain date and that they have already booked their holiday. This can be a difficult situation but it is also a good idea to stress, from the very first day of employment, what the rules are and that management must approve leave before employees arrange a break. An effective means of minimising employee disputes is to ensure that you have created and clearly communicated (preferably in writing) the rules that operate in your business with regards to taking annual leave. This may include: • Stipulating how much notice has to be given before taking leave; • Requiring a leave application form to be submitted; • Nominating who has the authority to approve leave; • Outlining any blackout times where leave will not be approved; and • Spelling out how excess leave accruals (usually eight weeks or more) will be managed. Also consider carefully the implications of letting an employee take annual leave to which they are not yet entitled. If the employee then resigns, a written agreement authorising you to deduct the amount owing from their final pay can be of assistance.

Peak time vs closedowns Many businesses experience their busiest time of the year over the summer months, particularly those in retail, tourism or hospitality industries. It can be prudent in these businesses to declare these periods as ‘blackout’ times where the taking of leave will not be granted, as all hands will be needed on deck. Communicating this in writing ahead of time can minimise unnecessary employee disputes when management refuses applications for leave during those nominated times. Conversely, you may close your business at particular times of the year such as Christmas. In these circumstances, you will need to give written notice to your employee of the closedown (no less than four weeks) and that they will be required to take mandatory annual leave.

The final word Employee annual leave does not need to be a headache and a source of disputes. Understanding your legal obligations, creating the rules and engaging your employees in a dialogue from the outset about annual leave protocol in your business will make for effective annual leave management. Being proactive about leave management will assist you in minimising your annual leave liability and will ensure that your employees take their leave at a time that suits both them and the business. So don’t leave this important area to chance and ensure that it is you and not your employees who are controlling annual leave.

EXPERTS SHERALYN GUY

The HR gem – the position description

he humble position description provides a critical foundation for the activities required to get the best from people and manage them well. It can deliver many benefits and the process of creating one can be just as beneficial as the document itself.

What is a position description? Position descriptions detail the key elements of a person’s role and should contain the following essential information: • Position title — what the job is called; • Position purpose — the key reasons the position exists, aligned to your business goals; • Accountabilities — a detailed description of the tasks the role is responsible for and the standard of performance that should be met; • Behaviours — how you expect someone to perform their role (being proactive, working collaboratively, working independently); • Delegations — what the person in this position is authorised to do, without approval from managers (spend money, give credit notes, sign-off on quotes); • Skills and knowledge — the capabilities and experience a person in this role will need to succeed; and • Key performance indicators — how you will measure the success of the person in this role. Other position description items can include health and safety responsibilities and relationships to other positions.

Creating a great position description Creating a good position description takes time, but the benefits will far outweigh the initial time investment and will save you time in the future. Here are my tops tips for creating a high-quality position description: • Source a good template —You can find templates online or buy them cheaply from HR companies. Make sure the template is relevant to your business; • Understand your business goals — Then be clear on how this position will help you to meet those goals; • Many minds make better outcomes — Engage as many people as you can when creating position descriptions. If you don’t have a team yet, ask mentors, friends, or an HR professional to help you out; • Ask the right questions — How will this position help achieve your business goals? What performance standard do you expect? What are your company values and how would you expect someone to represent them? What would the ideal person in this role be like? What would success look like in this role at the end of a year?

• Google the position — Take ideas from position descriptions and job advertisements for similar roles; • Include broad accountabilities — How will this role support your broader team and wider business goals? Include this so, when something outside of their normal role comes up, they won’t be able to say, ‘It’s not my job’. • Let it rest — Review the position description at least a couple of times with your team before signing off on it. Subtle changes you make with each review will result in a superior document; • Dress it up — Once you’ve finalised your position description, format it, edit it and brand it with your company details; and • Seek expertise — If you are stuck for time, outsource to an HR professional.

“The process of creating a position description can be just as beneficial as the document itself.”

How to use a position description Once you have a good set of position descriptions, put them to work in the following ways: • To promote roles — Include a link to the position description on your social media sites, email it to candidates, put it on your Website. Make sure it reflects your business in the professional language it uses; • To write ads — Use it as the basis for drafting job ads; • During interviews — Use it as the basis of selection criteria during interviews and as a guide to tailor your interviews; • For referee checks — Once you’ve evaluated candidates, use it again during referee checks; • To determine employment conditions — Use it to identify your legal workplace obligations for the role (what award it falls under) and to establish pay rates; • To set expectations — Use the performance and behaviours outlined in it to convey your expectations to other team members. Keep the document ‘alive’ by referring back to it over time; • To develop people — Refer to the skills and knowledge outlined in it to ensure people get appropriate training. It can also show other team members aspiring to that role what skills they need to build; • As a benchmark — Evaluate how the team member is performing against the expectations set out in it; • To manage change — Compare an old one to a new one to see how the role has changed and chart a plan for enabling the change to occur. Position descriptions are the backbone of your people management framework. Use them throughout your employee relationship to get the best from your most valuable asset – your people.

Sheralyn Guy is Director of HRhelp, a company dedicated to providing affordable, practical and effective HR services to small to medium-sized businesses. For further great HR ideas, call 02 8006 1280, email gethelp@hrhelp.com.au, or visit www.hrhelp.com.au 61

EXPERTS DONNA STONE

Five fresh tips “When you send or give a product to a customer, put a voucher in their package that offers them something free when they refer a friend.”

ith the launch of my new book, Stepping Stones to Business Success, I thought it might be a good time to share some of my favourite tips. So, here are five of the over 200 tips you’ll find between its covers.

1. Calculating average collection days This one is a really important and rarely calculated indicator of business health. If it is taking you 105 days on average to get paid, guess what: the ‘life blood’ of your business is being choked off. And it is a statistical fact that the longer a debt is outstanding, the greater the likelihood that you won’t recoup it at all. Set yourself a goal to reduce the average collection days by at least one day every month from now on. Here’s how: A = sales for the last 12 months (inc GST, let’s use $3,762,000) B = days in the year (let’s use 365) C = debtors value for the last month (in this example, let’s use $270,000 A/B = X then C/X = Y 3762000/365 = 10,307 then 270000/10307 = 26.2 collection days.

2. Networking is not about closing a deal Too often, people think that networking is about making a sale today! Networking is about building relationships, which takes time. In marketing, it’s said that someone needs to be exposed to something at least four times to have the best effect and networking is similar. People need to get to know you, see you regularly and build up that rapport and trust. Also, please remember not to dismiss the person you are speaking with because you figure they won’t need your services. The average person knows 200 people. For example, if you are a hairdresser and the person in front of you is bald, do you think that person knows people with hair?

3. Track your leads Donna Stone is the author of ‘Stepping Stones to Business Success’, which is available for sale for $25 (plus P&H) from www.donna-stone .com.au, or email donna@ donna-stone.com.au to organise a copy today.

SEPT 2011

When a prospective new client rings you, do you always ask how they heard of you? You absolutely should, and then, of course, note this down. You might keep a sheet with 10 different boxes, for the different ways someone can reach you (adverts, staff, friends, associates, marketing mailout, Web page etc) and put a tick for each time a lead comes from that direction. Once you know where the leads are coming from, you will know which marketing methods are working and which one’s aren’t. If you spend $10,000

per annum on magazine advertising that generates $1,000 of income per year, would you continue? If that same ad generated $1 million, I’d be duplicating it. Take note of those who sing your praises and tell others about your business, and remember to reward them. In fact, that can be one of your strategies. When you send or give a product to a customer, put a voucher in their package that offers them something free when they refer a friend. Maybe they will get a discount, or a free gift as a token of your thanks. The gift may cost you $20, but what is the new client worth to your business, particularly factoring in repeat sales?

4. Do what you do well and outsource the rest You may be an excellent salesperson, great electrician, wonderful designer, fabulous chef, dedicated doctor and you may well be able to do many other tasks, but should you? You might have the intelligence or skills to do the task, but if you are a doctor, for example, should you be doing something like typing or debt collecting? An administrator’s hourly rate is most likely going to be far less than your charge-out rate. What could you achieve in this time? Other tasks you may consider outsourcing are marketing, cleaning and purchasing, just to name a few. Sometimes you will delegate to an expert, and other times to a junior.

5. Book a holiday This is a good one for me. I get caught up, then realise it is Christmas and when I go to book something, everything is taken or is now a ridiculous price. Plan your year in advance and book regular holidays. If you decide you will have a week off in late January, a week at Easter and then a week in late September, why not book it in your diary and actually make the booking and pay your deposit. Having booked, paid, and blanked out the time in your diary, it is pretty much assured you will follow through on having that break — and come back to work recharged and ready to conquer the world.

FREE books up for grabs! Simply email donna@donna-stone.com.au and include your full name and address. Subject field should be ‘My Business Magazine Comp’. The first email I receive from each state will receive a free copy of my book ‘Stepping Stones to Business Success’, which will be promptly mailed to the winners. Action immediately and good luck!

EXPERTS PHIL LEE

IS you pty ltd ready to sell?

s salespeople, we are effectively in business for ourselves. In fact, one of the great attractions of a professional sales career is that we have the opportunity and potential to determine our own income and future. To realise this potential, we need to act as if we are running our own business. I like to call it You Pty Ltd. Do the Managing Directors of successful organisations typically have a business plan? Do they know where they want their company to be three, five, 10 years down the track? Of course they do! In the same way, if we are to optimise our earning potential as a professional salesperson, we must have a plan for You Pty Ltd and be very clear about what we need to do to achieve our goals and vision. Over the years, I’ve identified eight requirements that are necessary for creating a legendary sales career. As you read this article, I suggest you rate yourself from 0 to 10 against each requirement to assess where You Pty Ltd is right now.

1. Passion People and organisations that are consistently successful typically have a burning desire for a successful outcome. Whether we’re talking about the number one boy scout raffle ticker seller, the Special Olympics athlete or the CEO of a successful corporation, they all share a passion to achieve their goal. How would you rate your level of passion for your sales career?

2. Commitment How willing are you to do whatever it takes to achieve your professional and personal goals? Will you go the little extra that most others are not prepared to? This doesn’t necessarily mean that you give up your personal life so that You Pty Ltd can be a success. Maybe it just means getting into the habit of making two more cold calls when you have achieved your targeted behaviour. What is your current level of commitment?

3. Partnerships Lofty goals are not easily achieved alone. Successful people often have mentor relationships with others who have already ‘climbed the mountain’. It’s okay to ask for help. What kind of help do you need? Who can give it to you? How do you currently take advantage of this principle?

4. Investment Do you have an abundance mentality or a scarcity mentality? Investing in resources to help you to achieve your vision will be a struggle if your attitude is one of scarcity, and this doesn’t only refer to money. We also need to invest in

time, learning, and anything that will solve the issues holding us back. Take a moment to rate your attitude in terms of an abundance mentality.

5. Health maintenance You are the engine that pulls the train. Failure to take care of yourself can be a major factor in the success equation. The overall maintenance of a healthy mind, body and spirit is critical for success. You can’t have a successful career if the rest of your life is falling apart. Rate yourself from 0 to 10 on this important aspect.

6. Friends and family Friends and family should be a major priority, as they are your support mechanism and your necessary diversion from the daily grind of work. In good friends and nurtured relationships with family you will find an oasis where you find rest, relaxation and good fun. How do you currently rate in this vital area?

“Have a plan for You Pty Ltd and be very clear about what you need to do to achieve your goals and vision.”

7. Ongoing personal growth and development There is nothing more certain than change. It is therefore important to value the journey as much as arriving at the destination. Learning keeps us sharp and ahead of those who simply put in a nine-to-five effort for the same pay cheque each week. Personal growth is what facilitates you going to the next level. How much value do you place on learning and growing?

8. Personal presence People are attracted to people who are confident and comfortable with themselves. They feel a kinship that allows them to feel comfortable with you and helps lower communication barriers to reveal the truth. Personal presence is about your appearance, your eye contact and handshake, the questions you ask, your ability to set meaningful agreements and articulate possible outcomes, and your general aura of professionalism. It says to the prospect, ‘I’m not dependant financially on whether or not we do business’. On a 0 to 10 scale, where would you place yourself right now in this area? Now that you have a score for each requirement add them up and divide by eight to determine your average score. If you average a seven or above, well done! Chances are You Pty Ltd is in pretty good shape. Even if you’re not in that category, the good news is that all of these requirements can be developed and improved upon.

SPECIAL OFFER*: If you are the owner of a SMB in Sydney with at least four outbound B2B salespeople and you’d like to have Phil make a free, inspiring presentation at your next sales meeting, send an email to plee@sandler.com *Some conditions apply

Phil Lee is a sales performance expert, personal growth coach and soughtafter speaker. He can be contacted on 02 9300 6001.

EXPERTS BRIAN WALKER

Is your business for sale? “A business that does not have operational systems in place is less valuable.”

‘S

tarting with the end in mind’ and ‘the independent investor’ are two of the topics that I quite often speak about with clients andwhen I’m at tradeshows and conferences. We believe that every business is for sale and the fit business is the one that maximises its market value to its potential investor and therefore its selling price. There are many how-to steps for a retailer to cover in making their business ‘fit for sale’. When commencing the process of assessing your businesses value to investors, begin by asking yourself the following questions: 1. Does the business have a defendable and unique competitive advantage? This question seems fairly straightforward, but some critical fitness questions come from this point with a retailer’s position needing to be defendable, replicable and leveragable to achieve the higher fitness and therefore the greater sale when the time comes. Investors want to know what makes your business unique such that no-one else can copy the brand and its values. 2. Are the sales-per-square-metre and comparative store data above benchmark? These metrics are reliable indicators of how well management is using store space and allocating resources. Generally speaking, the higher the sales-per-square-metre, the better. In other words, using this metric, an investor could assume that one retailer’s management is making better use of its floor space than its counterparts/competitors. It may also suggest that a better merchandise mix, and possibly more flexibility with respect to margins, although examining other factors will determine whether this is the case. Comparative store sales data is another critical metric in retail sales analysis. Same-store-sales data reveals how a store, or a number of stores, fares on a period-to-period basis. Ideally, an investor would like to see both sequential and year-over-year same-store-sales growth. Such an increase would indicate that the company’s concept is working and its merchandise is fresh.

To get ‘Fit for Business’ today, contact us by phone on 02 9460 2882, on email at businessfitness@retaildoctor .com.au, or visit us online at www.retaildoctor.com.au 64

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3. Does the business rely on the owner for success? A business that does not have operational systems and frameworks in place, and is overly reliant on the owner or CEO is simply less fit, and therefore less valuable, than a business that has all the frameworks in place and can operate independently to achieve a desired end result. These frameworks and systems include, but are not limited to, brand and marketing, communication, logistics,

information, financial controls and reporting, HR systems, visual merchandising, and compliance/operations. 4. Do you have a history of growth? Financial reports such as one balance sheet or one profitand-loss statement are invariably worthless. A series of these reports including cashflow starts to tell the investor as to the growth in business net worth and where the cash actually goes. Investors should look for sequential and year-over-year growth in gross margins, inventories and accounts receivable and will hope to see a growth trend in the business. Other factors reviewed include diagnosing if the business is fit, is successfully generating cash, has strong earnings growth and low earnings volatility, and is achieving healthy earnings per share (public) against growth rates. Other considerations are if the business is increasing net asset value, has positive asset and liquidity ratios and is highly solvent, and that it uses ‘best practice’ benchmarks in all of its ratios. 5. Does your business drive its working capital ratios? Most importantly their inventory performance. Ensure that you know the trends of your inventory performance. After all, inventory is generally the single largest investment a retailer makes over time. Understanding the inventory performance in: • Quantity (how much have we got?); • Quality (what is the profile of the product mix and its relationship to sales mix?); and • Productivity (how often does it turn throughout the profile? What is the trend on weeks cover?); Do you have an integrated merchandise management and sales POS producing valuable management information? 6. What do you see when you visit the stores? An investor can learn a lot simply by visiting the range of stores from the highest-performing to the lowest. Visiting unannounced is best and allows investors to look for details such as store layout, the availability and appearance of the merchandise, the quality of the back room in sales targeting and stock management, pricing policies, service levels and compliance, foot traffic, and the marriage of the brand message to the in-store experience. Investors should be wary of companies that are experiencing a decline in gross margins. This is because those companies are probably experiencing a decline in revenue or foot traffic, an increase in product costs, and/or heavy mark-downs of their merchandise, all of which can be detrimental to earnings growth.

EXPERTS TRANH NGUYEN

Crossing the East-West business divide

f you walk down John Street, Cabramatta in Sydney’s west, you will encounter a plethora of small businesses run by Asian families — from shops displaying fresh seafood, colourful fruits and vegetables to supermarkets stocked with speciality products from all over Asia. There are many fabric, fashion and shoe shops — and don’t forget the food! This scenario is seen all over Sydney, from Sydney’s Chinatown, to the inner-west suburbs of Marrickville and Ashfield, to the south-western suburb of Bankstown. Many of these small businesses are owned by first and second-generation Asian migrants, who came to Australia with dreams of freedom and providing a better life. These small businesses have been the hub of many local council’s economies — it is estimated that over 15,000 people visit Cabramatta each Sunday alone. Many of these small businesses struggle. Their owners work long hours, seven days a week to make ends meet and build a business in a country where the business practices are often foreign to them. Many started businesses without a business plan, but with a dream of working for themselves without a boss, and in the hope of prosperity. But for many, the many facets of running and maintaining a prosperous business are a foreign concept, too, often due to a lack of education and English skills. Funds to initially run the business are often borrowed from family and friends and from there business owners hope that the business will prosper enough to cover the bills. For a small Asian business, employees are often your family members or friends of a friend, staff training means learning on the job, and marketing consists of a small advertisement in the local community newspaper. Businesses are run on a day-to-day basis. For many small business owners, the long hours and total investment in the day-to-day operations of the business often mean that other important areas of the business are forgotten or not even known about. For many small business owners, there is simply not enough time for them to find out about changes to laws and regulations affecting them, or ways to improve their business through the changing nature of the global economy. On top of that, Asian business owners need to deal with the language barrier to obtain this information. As a lawyer in an area with predominately small Asian businesses, I have seen how many of them fail to prosper or collapse due to their lack of commercial knowledge. There are stories of many business owners having to pay hundreds of dollars, simply because they did not understand what a letter meant in relation to failing to obtain the correct

licence or approval. Or business owners having troubles with the local council simply because each party does not understand the other. Small Asian business owners need a way to obtain information and stay up to date with the constant changes in the commercial world in order to grow, so their owners can realise the dreams they had when they opened. In the past 10 years, I have seen many small Asian business owners go broke because of a lack of understanding of the law; regulatory, compliance and licensing requirements; taxation issues; and, most importantly, how to compete effectively. And there is little or no support that’s readily accessible to many of them In response to this lack of support, I recently formed the Asian Chamber of Commerce and Industry, a not-for-profit and charitable organisation to that aims to advance and empower local Asian businesses in Sydney, especially in the Fairfield, Cabramatta, Bankstown, Marrickville and Chinatown districts, through the power of professional networking, innovative marketing and industry support. As such, its the principal objectives are to: 1. Advance the socio-economic, industrial, professional and cultural welfare of the Asian business communities; 2. Give member businesses and entrepreneurs a stronger voice and presence in local and national business communities in Australia; 3. Inform members about relevant legislative and market developments and changes; 4. Undertake training and education, including free seminars, conferences and newsletters for the benefit of members. To assist the Asian business community in breaking down the barriers that can hinder their growth and help them reach their full potential, the Chamber will deliver a number free programs, such as: • Regular newsletters; • Seminars and conferences to update members on current matters pertinent to their businesses; • Training programs to assist local business build their business opportunities; and • Social and cultural programs such as scholarships, social gatherings and functions. This Asian Chamber of Commerce is a small but important step for me in reaching out to help fellow small Asian business owners, and when they are equipped with the right legal information, combined with business and technical knowledge, I hope that they will grow strong, integrate into this society, and be able to do business successfully in Australia.

“Many small Asian businesses are trying to build a business in a country where business practices are often foreign to them.”

Tranh Nguyen is Principal Solicitor at East West Lawyers (www. eastwestlawyers.com.au) 65

EXPERTS SUE HIRST

“It is important to understand what all your costs are, because you need to know that you're making a reasonable margin.”

CFO On-Call is a nationwide business that regularly runs FREE Webinars on ways to improve costs and efficiency. Visit www.CFOonCall.com. au/webinars to register, or call us on 1300 362 436. 66

SEPT 2011

The value of correct costing

ne of the most important things for any entrepreneur is costing. If you sell products or manufacture goods, costing is a calculation of the cost of buying the product, plus preparing it for sale, including all inputs like freight, storage, currency exchange, importation etc. Overheads like rent, wages and administration costs are excluded from costing calculations. If you sell a service or jobs, calculate costing by counting the cost of direct labour, service and materials. Again, excludes overheads. It’s important to understand what all the costs associated with a product or service are, because you need to know you’re making a reasonable margin (the difference between sell price and cost price). A reasonable margin covers overheads and contributes to profit. It’s sometimes considered that selling more volume (more product or service) will fix a lack of profit and cashflow. Here’s an example of where this theory falls short:

Costing scenarios To understand the importance of costing, consider these two examples of costing calculation: Scenario 1 Business with yearly sales = $1,000,000 Costs = $700,000 (70%) Overheads = $300,000 (30%) Interest = $10,000 Loss = $10,000 Scenario 2 If sales grow in the next year to = $1,300,000 Costs remain at 70% = $910,000 Overheads remain at 30% = $390,000 Interest = $12,000 Loss = $12,000 Why has the interest gone up? In the business in this example, debt collection days are running at just under 53 (recent national average per Dunn & Bradstreet) and it has an overdraft of $100,000. If it sells more and the debt collection days remain the same, it will need to borrow, waiting for customers to pay more money (an extra $29,000). Overheads would likely go up, as it would have to spend more on advertising, sales etc to achieve the extra sales. If it could reduce the costs by 2 per cent, it would look like this: Scenario 3 Business with yearly sales = $1,000,000 Costs = $680,000 (68%) Overheads = $300,000 (30%) Interest = $8,690 Profit = $11,310 The interest has gone down because it needs to borrow less funds to pay for the costs.

The difference between Scenarios 2 and 3 is a $23,310 improvement in profit. This would likely be a lot less expensive to achieve than a $300,000 increase in sales. If it could reduce the debt collections days from 53 to 43, there’d be a $29,340 reduction in borrowings and a further $1,956 interest saving. This is why it’s so vital to keep a keen eye on your costs and overheads. A small reduction in them can far outweigh a large increase in sales. Here are some ways to reduce costs: 1. Review and negotiate with suppliers. Technology has opened up many opportunities to improve efficiency; 2. Get suppliers to ‘tender’ for your business; 3. Look for innovative ways to improve processes. Research your industry to find out what ideas are available; 4. Check what the top performers are achieving and investigate how they achieve their margins; 5. Lock in good exchange rates with forward cover on foreign currencies; 6. Regularly looking at the percentage of cost of goods so you know when to renegotiate or seek alternatives; 7. Use ‘purchase orders’ — other people ordering goods or services may not know something you do about a change or potential obsolescence. If you’re in a services business: 1. Reduce materials on jobs by managing wastage and write-offs. Review ordering methods and introduce systems like job cost sheets to track goods on jobs. 2. Maximise contractor and staff efficiency (check ‘nonchargeable’ time). If work can be done by less expensive staff, it frees up more costly people for chargeable work; 3. Have a quoting/estimating system and measure actual costs against them for each job to see which took longer; 4. Have a system for following up quotes and tenders. Review operations for efficiency and reate a sense of urgency; 5. Have one person managing jobs with a good understanding of status and progress to ensure jobs get done efficiently; 6. Manage labour resource allocation and track staff/ contractor time spent on jobs. Schedule jobs and travel efficiently; 7. Make allowances for variations to material prices on jobs to avoid hold ups; 8. Have good quality control to avoid rework and investigate write-offs; 9. Use checklists and templates to maintain standards; 10. Keep equipment maintained to avoid down time; 11. Have ‘key performance indicators’ for jobs such as ‘number of quotes’ versus ‘jobs won and lost’; and 12. Use a job management system to keep information easy to access and available for improving job profitability.

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EXPERTS IVAN MISNER

“Extroverts are good at meeting someone new. Introverts are better at listening to the person he or she just met.”

Called the “father of modern networking” by CNN, Dr Ivan Misner is a New York Times bestselling author. He is the Founder and Chairman of BNI, the world’s largest business networking organisation. For more writing by Dr. Misner, visit his blog at www. BusinessNetworking.com 68

SEPT 2011

Are networkers all extroverts?

common assumption is that an extroverted, ‘people person’ is the best type of networker. But this isn’t necessarily true. Most people who have their own business and who depend directly on others buying their products or services have at least a certain comfort level dealing with people. They may not be outgoing or gregarious, but they can form meaningful relationships and communicate their ideas. For these people, referral marketing is the best way to build their business, because referral marketing is marketing through relationships. Networking is truly a two-part process. First, you have to meet someone new, and be prepared to share information about yourself with them which will be of interest either to them or to someone in their network. The extrovert may be better at the first part of the process — meeting someone new, but the introvert is better at the second — listening to the person they just met. Far too often, though, introverts literally eliminate themselves from the benefits that come from networking and relationship building, because they aren’t comfortable with initiating conversations. This is unfortunate, because they are better at the part that is more important to the relationship process! Yes, it’s true! The type of networking I recommend can actually be easier for the introvert than for the extrovert. If this doesn’t make sense to you, think about it this way: networking is about building relationships. It’s important to point out here that even introverts (or should we say especially introverts) have relationships. There is a vital difference in the ways the extrovert and introvert build relationships. The extrovert wants to talk about themself, while the introvert wants other people to talk, so the introvert is perfect when it comes to building relationships. A good networker has two ears and one mouth — and uses each proportionally. A good networker asks questions and gets to know the other person. And once he knows the other person, it is so much easier to formulate a solution (that he can provide) to solve a problem, or ease a concern.

You are an introvert One evening in a dinner conversation with my wife, I mentioned something about my being an extrovert. She looked over at me quite earnestly and said, “Um, honey, I hate to break it to you, but you’re an introvert.” “Come on,” I protested. “I’m a public speaker and founder of the world’s largest networking organisation. I’m

not an introvert! I can’t be. You’re joking, right?” I have to admit I was taken aback. That day, I found a test on the Internet that tells you whether you are an introvert or extrovert. Was I in for a shock: the test said that I was a ‘situational extrovert’! It explained that I was something of a loner who was reserved around strangers, but very outgoing in the right context. In the haze of my surprise, some very important things became clear for me. It struck me that the reason I started the BNI networking organisation almost three decades ago was because, by nature, I was uncomfortable meeting new people. The smaller, more intimate approach to building a network created a ‘system’ that enabled me to meet people in an organised, structured networking environment that did not require me to actually talk to strangers. When I visit regions, I ask the local Director to have someone walk me around and introduce me to visitors and members so that I can connect with as many people as possible. But in reality, it’s because I’m uncomfortable walking around introducing myself alone! So, if you’re also introverted, stop using that as an excuse not to network. Introverts can actually be more adept than extroverts at the art of networking, because they are comfortable listening to other people. This, in turn, helps them make true, long-term connections with others. Over many years of teaching people the art of networking, I’ve learned that there are many techniques that can be used to make the process easier — especially for those who are a bit introverted. Put these to work for yourself: 1. If you feel uncomfortable walking up to total strangers at an event, volunteer to be an ambassador for that group. In this role, you are in effect a host for the chamber, which makes it easier and more natural for you to greet people. 2. Many opportunities to learn the art of network abound, and often in places you may not have considered. Do you do volunteer work for a cause you’re passionate about? These are great opportunities for meeting new people, many of whom could be future clients! Your services will always be needed for organising committees, recruiting other volunteers (on the phone or in person), or soliciting donations for your group’s worthy cause. 3. Other people have become great networkers by joining a parent-teacher association, where there are certainly many opportunities to speak on behalf of the children, or perhaps coaching in a children’s sports league, working on a fundraiser. Above all don’t forget that networking is a skill set that can be learned — no matter your level of gregariousness.

EXPERTS TONY GATTari

Systems, procedures and customer delight

ou take your car in for service. The service office is immaculately clean and resembles a hotel lobby. The smell of freshly brewed coffee is in the air, and you ask yourself, ‘How come I cannot smell any car fumes?’ The service manager greets you, is well dressed in a neatly pressed shirt and tie, with a name badge. You give him the keys, and he asks you, ‘Do, you mind if I go through our 12-Point Service Guarantee?’ He then places the form in front of you, and points his pen next to each of the guarantees as he explains each one to you. You then drive off in the courtesy car. The car is the latest model, and it drives fantastically. As you are driving it, you say to yourself that this will be your next car. You are phoned later in the day by the service manager to tell you the car is ready for pick up. On your arrival, your car is waiting at the front of the office, and has been cleaned inside and out. Before you are about to pay, the service manager goes through all of service points that were carried out. You do not even care about how much the service was, because it was so good. A couple of days later, Suzie, from the customer care department of the dealership, gives you a courtesy call. She asks you a few non-intrusive questions about your thoughts on the service and the performance of the car, and if you have any questions about the whole experience. The car is working perfectly, and you are totally satisfied by the experience and you love the fact that the dealership wanted to know your thoughts. Here is an example of a perfect link between what the dealership had in mind as it was creating the vision, mission, values, and unique selling proposition for its business, and what the customer wants from any engagement. Can you see how the dealership has built a system? Here’s a breakdown of this experience: 1. On your arrival the service staff had uniforms and name badges so that you could identify them with ease. Before they serviced your car, they go through a script — the 12-Point Service Guarantee. From all the current affairs shows that expose dodgy car services, consumers have a general fear of being cheated on what they have paid for. This 12-Point Service Guarantee reduces the fear in the purchase, by highlighting that the dealership will deliver on its promise. 2. The courtesy car that is provided is also a system. It is a marketing system that is designed to get you hooked on the latest model of cars. Car manufacturers and dealerships have done thousands of studies on the impact that driving a new car has on future purchases.

3. Upon your arrival, the car was cleaned for you inside and out. In a time-poor society, we sometimes find it difficult to clean our cars, and the dealership again has saved you time and money. 4. When you collect your car, the service manager goes through another script with you, explaining all the service points that were done to your car. This is again to allay any fear in your mind that you may not have received what you paid for. 5. The follow up phone call is to gain customer feedback on the service. The dealership records all of the information, and discusses it in team meetings. Any issues that are raised are quickly dealt with. The systems that have been developed by the dealership have been well thought out. The systems have always focused on the customer before the needs of the business. This is always a challenge for many businesses, as they try to make their life easier instead of their customer’s, and in doing so, lose a lot of business because they have created barriers to making the purchase easier. Most of the time, these barriers are called ‘procedures’, and these procedures need to be defined separately from systems. Procedures are designed to reduce or eliminate any losses to the business, such as theft, fraud, or anything to do with the processing of financial transactions or inventory management. Systems are designed to either; • Increase sales and profit; • Save time; or • Improve the quality of service that is given to the customer.

Activation To deliver a similar service in your business, follow these four steps: 1. Write down one common engagement that you have with a customer that you would like to create a system; for example, a customer purchase, a refund, a customer complaint or a phone enquiry. 2. What are the customer’s expectations from that engagement? 3. Close your eyes for a moment. Can you visualise how that engagement is carried out? Now write it down. 4. Write down step by step how the engagement is carried out? List all of the functions of the business that are involved in this system (e.g. marketing, finance, human resources, sales, administration, plus operations and production).

“Many businesses try to make their lives easier, instead of their customer's.”

ABOUT ACHIEVERS GROUP The author is Founder and Chief Energy Officer of Achievers Group. He is a much-in-demand, passionate professional speaker, business educator, author and corporate business advisor. He has worked with over 140 businesses around the world. Find him online at www. achieversgroup.com.au, email him at tony@ achieversgroup.com.au, or phone 02 9025 3716. 69

BEC NEWS

COMMUNITY-BASED ORGANISATIONS HELPING SMALL BUSINESSES

Central Coast Business Enterprise Centre launches new products

Photo: Anson Smart; Courtesy Tourism NSW.

AUGUST 2011

Located north of Sydney, the Central Coast has few large industries and a business community that finds customers beyond the region. But the area’s BEC is trying to turn this around and foster growth.

ew South Wales’ Central Coast is Australia’s ninth-largest urban area and boasts a population of 300,000. It’s also home to 22,000 small businesses, although many don’t serve customers in the region. “We have a very large number of businesses who commute to service clients in the Hunter Valley or Sydney,” says Wayne Gates, Chief Executive Officer of the Central Coast Business Enterprise Centre (CCBEC). “Thirty-three per cent of our local workforce commute to work in Sydney,” he adds. “Thirty-three per cent of local businesses are retail and 25 per cent are trades The next major sector is business-to-business services, but we have very little manufacturing or industry.” That lack of substantial local businesses means local organisations don’t have a large business-to-business customer pool. The result, Gates says, is that the region “is stuck at the bottom of the two-speed economy.” Another issue for the region is that baby boomers own many of its businesses, and many are contemplating exits in the next few years. Gates therefore feels he has two challenges. “One is helping startups and the other is succession planning.” To meet the former challenge, CCBEC has recently developed a suite of products in conjunction with the NSW Business Chamber. These offerings give local businesses access to processes, procedures and documents they need to grow. “If you want to go from being a sole trader to employing someone, it will cost you $700 to $1,000 to get a contract from a solicitor,” he says, “Most just don’t want to do that, so they put people on and when it goes pear-shaped they are in trouble.” CCBEC’s new products make that kind of documentation far cheaper – members who pay the organisation’s $249 membership fee will have access to many documents for far less than they would cost through a solicitor. “If you want a letter of offer, it is $149. A non-smoking policy is $30,” Gates says, explaining that by making these business building blocks available at an accessible price, he hopes to make it easier for startups to grow beyond one-person operations. “The difficulty with micro-business is getting over the hurdle of working from home to employing someone,” he says. “They start as a skilled practitioner, but many factors on the Central Coast inhibit them taking that next step to becoming a small business. Commercial organisations focus on the next tier of business – those with five to 10 employees. That’s why we think making these resources available will be a big help.”

BECs support 100,000 businesses

ustralia’s 37 Australian Government-funded Business Enterprise Centres (BECs) have passed the milestone of helping 100,000 small businesses during the past three years. “These advisory centres are proving a valuable asset for Australia’s vibrant and diverse small business community,” Small Business Minister Senator Nick Sherry said during the launch of an Australian Government BEC project in Launceston. “More than 100,000 small businesses have taken the opportunity to seek the free or low-cost expert advice provided by the BECs during the past three years. “The Australian Government is ensuring small business people have the advice they need to run and grow a successful business. “Our BECs are providing assistance in areas such as business and marketing planning, leasing guidance, legal and accounting, loans and banking advice, government regulations and mentoring. “The dedicated professionals in these BECs are experienced in small business matters and understand the needs of small business in their local area, because they are part of the community themselves. “As someone who lives in regional Tasmania, I recognise the important role they play in the economic life of local communities,” Senator Sherry said. The BECs began operating in July 2008, funded for four years under the Australian Government’s $48.25 million Small Business Advisory Services program. The Government, in this year’s Budget, also provided $7.1 million of new funding for the Small Business Support Line to continue its popular services for the next four years. A list of the 37 BECs can be found on the Small Business Advisory Services page at ausindustry.gov.au

For further information, contact Business Enterprise Centres in Australia on 1300 363 551 or visit www.becaustralia.org.au 71

By the numbers

52% of small businesses feel more stressed than they did a year ago.

Source: Bibby Small Business Barometer, July 2012

83% of retailers believe consumers spending will fall as a result of the carbon tax. Source: Australian Retailers Association, August 2011

35%F EXPORTERS say the Christchurch earthquakes have made the biggest negative impact on their offshore earnings. Source: DHL Export Barometer, August 2011

of Australian households earn more than

$200,000 a year.

11%

28%

of firms increased sales compared to the June quarter 2010

26%

earn less than

$30,000 a year.

Source: KPMG Australia and Nine Rewards lifestyle survey

experienced lower sales. Source: Dun and Bradstreet National Business Expectations survey, August 2011

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