my business magazine: March 2012

Small Business Minister Mark Arbib • Don’t leave your bank • GoGet’s fleet management tips

Official publication of the SME Association of Australia

MARCH 2012 • $6.95 (gst inc.)

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Greece FRIES Building

wealth to protect a child Equal pay decision equals opportunity Businesses with heart • BRAD SUGARS ON TOUR • SMEAA ON LINKEDIN

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New Camry Atara Inspires confidence

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MARCH 2012

www.mybusiness.com.au

CONTENTS

Cover Story

Regulars

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News and Views Gadget Guide By the Numbers

How secure are you online?

Our investigation reveals that when it comes to accepting credit card payments, security is less comprehensive than you may imagine.

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Small Business MP Mark Arbib

Love the bank you’re with Banks are acting up again, but that doesn’t make it a good time to shop for a new one.

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Succession strategies Private Equity investment can offer a powerful and lucrative way to exit your business.

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LEADERSHIP

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My Business meets new Federal Small Business Minister Mark Arbib and asks about his priorities for the portfolio.

Leaving leadership behind Stuart Hayes concludes his series on leadership by showing how leaders can leave their businesses.

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Why people fail Lisa Rubenstein’s research shows how and why some workers and leaders fail and how you can turn them around.

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FLEET MANAGEMENT

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GoGet’s fleet management secrets 42 The founder of boom car share company GoGet explains how he learned about fleet management.

Five hidden logistics costs 46 Fleet expert Walter Scremin explains five sources of unwanted costs that can plague your logistics efforts.

TECHNOLOGY With the global economic outlook uncertain, we asked experts how you can shock-proof your business.

The group buying industry has evolved rapidly and now has new ways to help merchants and customers alike.

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Toxic behaviours can destroy your business, so we’ve listed ten of the worst to help you spot them—then stamp then out!

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Table of Plenty is a business with a purpose—providing for a child who will need lifelong care.

Clouds can kill 50 Cloud computing is cheap and powerful, but also a profoundly disrupting force that can hurt your business.

EXPERTS Robyn Anderson Michael Griffiths Phil Lee Tony Gattari Nicole Nott Ivan Misner Sue Hirst Brian Walker

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SMEAA NEWS Caroline Hong SMEAA News

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EDITOR’SLETTER NEWS&VIEWS NEW TED, the global events featuring innovators, thinkers, leaders and change makers, is auditioning speakers from around the world. The press release announcing the auditions says “Producthawkers, jargon-junkies, dullards, wafflers, motivator wannabes, self-promoters and spouters of new-age fluff should not apply.”

I want to share that sentence because this is my last issue as Editor of My Business. I’ve decided to do geekier things elsewhere. It’s been my privilege to work with the magazine for eight years as Technology Editor, Export Editor, Web Editor and Editor. I’ve also worked with wonderful people who’ve tried their hearts out, and I’ll never forget or stop appreciating that.

My philosophy has always been to bring you practical and timely information. That’s not always been easy because among those seeking a presence in the magazine are plenty of producthawkers, jargon-junkies, dullards, wafflers, motivator wannabes, self-promoters and spouters of new-age fluff.

During my time at My Business I have always tried to apply a BS-filter to that kind of stuff, because if you’ve taken the immensely brave step of starting a business you deserve contributors whose motivation is something loftier than selling to you or fluffing up their clippings book.

I can’t judge the success of our attempts to bring you a practical magazine full of actionable advice, but I sincerely hope you have found the contents of these pages have helped you.

If even one of you has been able to build a better business as a result of reading My Business, I’ll be very proud of my time here.

Magazines don’t exist without readers, so many thanks for the chance to work here. It has been an enriching and life-enhancing experience.

Simon Sharwood Editor My Business

Business population grows EDITOR Simon Sharwood 02 8923 8017 | mybusinesseditor@mybusiness.com.au CREATIVE DIRECTOR Tim Hartridge GRAPHIC DESIGNER Monica Lawrie PRODUCTION MANAGER Russell Montgomery CONTRIBUTING EDITOR Andrea O’Driscoll | andrea.odriscoll@commstrat.com.au NATIONAL COMMERCIAL DIRECTOR Tony May 02 8923 8001 | tony.may@mybusiness.com.au WEB www.mybusiness.com.au SYDNEY OFFICE Level 12, 99 Walker St North Sydney NSW 2060 T 02 8923 8000 F 02 8923 8050

MELBOURNE OFFICE Level 8, 574 St Kilda Rd Melbourne 3004 T 03 8534 5000 F 03 9530 8911

MY BUSINESS IS THE OFFICIAL PUBLICATION OF THE SME ASSOCIATION OF AUSTRALIA www.smeaustralia.asn.au

MY BUSINESS IS PUBLISHED BY COMMSTRAT ABN 31 008 434 802 www.commstrat.com.au My Business material is copyright. Reproduction in whole or part is not allowed without written permission from the editor. Investors should seek independent advice before entering any contracts.

SUBSCRIPTIONS See the inside back cover for subscription information or email Ruth Spiegel at ruth.spiegel@commstrat.com.au ONLINE visit: www.smeaustralia.asn.au/membership PHONE on 03 8534 5009

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MAR 2012

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ustralia had 2,132,412 actively trading businesses in June 2011, according to the Australian Bureau of Statistics’ (ABS’) Counts of Australian Businesses, including Entries and Exits, Jun 2007 to Jun 2011 released in late January. That figure is higher than in the last such count, with business numbers rising from the 2,073,793 businesses operating in June 2007.

Australian businesses remain small in terms of employment and turnover, with just 826,389 (38.8%) of businesses employing even a solitary worker, compared to 1,306,023 non-employing businesses. As the ABS’ summary points out: “Of the employing businesses, 739,312 (89.5%) employed less than 20 employees. This comprised 508,674 businesses with 1–4 employees and 230,638 businesses with 5–19 employees.”

Just 125,123 (5.9%) businesses have turnover above $2m per annum. Only 6071 businesses employ more than 200 people. In the mid-range, 81,006 businesses employ between 20 and 199 employees.

The report also points out that 93.5% of new business numbers counted in the

survey period were micro-businesses employing zero to four staff. That category is also the most likely to have exited business during the survey period, with attrition of 16.9% for micro businesses easily ahead of exit rates from all other sized businesses.

My Business comments One of the oddest things we experience at My Business is companies approaching us with “solutions for small business” which they say suit companies with 200 or more employees.

This latest ABS data confirms, yet again, that it is entirely nonsensical to consider businesses of that size “small” in an Australian context.

As this data shows, and has shown in every release of this data we have read over several years, the most common type of business in Australia has no employees. The next most common type of business has a staff of fewer than five.

It’s time that industry responded with more realistic naming and targeting of its products. My Business will continue to point out the reality of the Australian business population to readers, vendors, interviewees and anyone who will listen!

WS&VIEWS NEWS&VIEWS NEWS&VI ActionCOACH My Business Awards return for 2012

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he ActionCOACH My Business awards will return for 2012.

ActionCOACH is back as naming sponsor for the 12th edition of the awards program, which will this year culminate in a gala event at the Sydney Hilton on the evening of September 28th.

ActionCOACH will once again decide the award for Outstanding Excellence, an award open only to those businesses that have taken out one of the nine other categories in the awards.

GIO will sponsor two of those categories.

One is the Best Small Business award.

The other is a new category, the Best Woman in Business.

Reckon will sponsor a to-be determined category, as will the SME Association of Australia (SMEAA).

Details of all categories in the 2012 awards, plus entry times and judging criteria, will appear in future issues of My Business and at www.mybusiness.com.au.

“The 2012 ActionCOACH My Business awards represent a wonderful opportunity for businesses to gain the recognition they deserve,” said SMEAA CEO Caroline Hong.

“Even for those who don’t win, we feel there

is a lot of value in going through the process of compiling an entry.”

“Cherie Donavan, the owner of the historic Segenhoe Inn which won the award for Best Small Business in 2012, said that just creating an entry gave her the chance to get some perspective on her business, what works and what could use some improvement.”

“So many entrepreneurs I speak to are flat out and struggle to get that kind of perspective. I hope every entrant wins a prize on the night, but experiences like Cherie’s show you can win just by entering.”

Economic indicators signal confidence rebound

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onsumers and businesses feel optimistic about the future of Australia’s economy, according to three recent studies. The Westpac/ Melbourne Institute Index of Consumer Sentiment, for example, jumped 4.2% in February. Westpac’s Chief Economist Bill Evans admitted that most research for the Index was conducted before the Reserve Bank kept interest rates on hold and banks increased home mortgage rates, and that sentiment may have changed as a result.

But Evans also pointed to some of the index’s individual categories, which saw a belief that family finances have improved over the last year, an expectation of further improvements and a belief the economy will continue to improve in the data.

The Index also found that 1.8% more households believe “now is a good time to buy a major household item.” Another positive indicator came from the latest Dun

& Bradstreet National Business Expectations Survey, which says Australian manufacturers, wholesalers and retailers expect big sales boosts in the June quarter, according to the latest. The Survey found expectations of a surge in sales that is at the strongest level since the December quarter 2003, well before the onset of the global financial crisis.

Dun & Bradstreet (D&B) CEO, Christine Christian, said the strong sentiment was encouraging and corresponded with D&B trade payments and collections data which indicated that business performance tended to experience a cyclical peak during the second quarter of the year.

“Historically, leading indicators of financial stability, such as cash flow, have improved during the June quarter as firms gain momentum. We are also no doubt seeing businesses increasingly factoring in the impact of further interest rate reductions on their operations,” Ms Christian said.

The Survey also suggests this could be a jobless recovery, with business sentiment about future employment falling slightly.

“This would appear to indicate that businesses are still taking a cautious, waitand-see approach on trading conditions before looking to expand their operations or their workforce,” Ms Christian said.

Another survey, conducted by specialist finance and accounting recruitment firm Robert Half, polled a sample of 300 chief financial officers and finance directors in Australia and found that 82% are confident in their business’ growth prospects in 2012 and over three-quarters (77%) are confident in Australia’s growth prospects.

32% of finance decision makers plan on hiring finance and accounting staff in the first half of this year. “This confidence has been reflected in a strong start to hiring in the finance and accounting industry in early 2012,” said Andrew Brushfield, Director at Robert Half.

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NEWS&VIEWS NEWS&VIEWS NEWS Feds to burn Phoenix companies

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he Federal Government plans to clamp down on one of the grubbier business practices, namely Australia “phoenix schemes” that see a heavilyindebted company wind up to avoid liabilities, then very quickly afterwards start a new company that offers the same services. The new company often has the same Directors and employees as the old company.

Creditors of the first company find it very hard to recover debts from the wound-up company and receive very little of the money they are owed.

David McCrostie, a commercial disputes partner at TurksLegal, says phoenix schemes are rampant, especially among companies with under one million dollars in liabilities.

“ASIC’s figures indicate that a staggering 75 per cent of all corporate insolvencies involve less than one million dollars in liabilities. Phoenix activity is rife in this sector because as any experienced [insolvency] practitioner knows, it’s practically impossible

to secure funding to recover these relatively modest sums. The upshot is a very large number of smaller unsecured creditors and statutory creditors such as the Australian Taxation Office currently have no realistic prospect of ever getting their money back”, McCrostie said.

“Phoenix activity has been a longstanding problem in Australia,” Crostie added. “It is simply plundering and pillaging by another name. It robs ordinary creditors and employees, puts legitimate businesses at an unfair disadvantage and places a huge burden on the economy and public purse.”

The good news is that the federal government is onto the practice and in late 2011 published a “Proposals paper: A modernisation and harmonisation of the regulatory framework applying to insolvency practitioners in Australia.”

That paper includes a section on insolvency issues that affect small business and mentions phoenix schemes as one of the practices worthy of reform.

The paper suggests it may be possible to reduce the use of phoenix schemes by introducing “The ability to take civil action to recover company property inappropriately dissipated prior to business failure and hold directors liable for insolvent trading.”

To fund such actions, the paper suggests small business should be able to access the “Assetless Administration Fund”, a pool of money retained by the Australian Securities and Investments Commission which “finances preliminary investigations and reports by liquidators into the failure of companies with few or no assets.” Already earmarked to hunt phoenix schemes, extending the fund to finance civil cases would give small businesses another way to recover funds from phoenix schemes.

TurksLegal’s Crostie likes the proposals and welcomes them, but warned that “the devil will inevitably lie in the detail.

The challenge now is for Parliament to back these promising ideas with firm legislative action.”

Venture capital dries up Established businesses beat start-ups to venture and private equity funding last year.

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f your bank has tightened its purse strings and gone cold on the idea of a loan, don’t put your house on a venture capitalist (VC) or private equity investor coming to the party – they’re getting pickier too.

That’s one of the key findings in the Australian Bureau of Statistics (ABS) new research, “Venture Capital and Later Stage Private Equity, Australia, 2010-11”, which found that “As at 30 June 2011, investors had $15.9b committed to investment vehicles, a fall of 8% on the revised $17.3b committed as at 30 June 2010.”

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MAR 2012

The value of investments also fell, down $200 million to $ 8.7 billion in 2009/2010 (which is also bad news because the dominant category of VC investors is pension funds).

These investors are also very hard to impress: the ABS says just two per cent of potential investments reviewed by venture capitalists and private equiteers ever see a cent.

Indeed, the ABS reports that just 875 new investees won funding in 2010/2011.

Among those investees were only a

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handful of companies under a year old— start-ups—while even companies that are two to four years old struggled to attract investment last year. Outfits with histories spaning five or more years did better.

In past years companies of that age were prime territory for these investors, but in companies five years and older became the most-invested-in category last financial year.

Forget VC, too, if you’re outside NSW or Victoria: 66 per cent of investment was made in those two States, with Queensland the only other state in double digits.

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S&VIEWS

VIEWS My Business meets NEWS& Mark Arbib Small Business Minister

Australia’s new Small Business Minister speaks to Simon Sharwood

S

imon Sharwood (SS): What’s your vision for the small business portfolio? What do you want to get done?

Mark Arbib (MA): I want to deliver the small business tax package that’s connected to the Minerals Resource Rent Tax. We have to get that in place because it will help so many businesses.

SS: But that’s only a one per cent cut to company tax and it won’t apply to nonemploying businesses, which are the majority of businesses.

MA: Yes, but there are 700,000 incorporated small businesses so the tax cut is not insignificant. On top of that there are the asset depreciation changes to assets under $6500. That’s not just for one item – you can get the benefit for as many items as you purchase. I think that’s important for small businesses, and farmers in particular, so they plan for the next 12–18 months.

The other area in terms of tax is the changes around carbon. One of the big changes is to tax scales, so those whose businesses operate on a pay as you go basis the low income tax threshold triples to $18,000.

SS: Do you think that higher tax-free threshold will encourage more people to start businesses?

MA: We want to make it easier if people want to start up a business. One of the things I would love to see expanded is the New Enterprise Incentive Scheme (NEIS).

If you are unemployed and have a big idea, you can go to Centrelink or a job service Australia provider and if approved you can receive 12 months of unemployment benefits paid up front, in bulk, to set up a small business.

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MAR 2012

SS: How’s the national dispute resolution scheme for business coming along?

MA: We are in the consultation phase. I want to take the time to look at the feedback.

When you are looking at future policy you do not want to add to regulatory burdens and in this case there are State dispute resolution procedures and small business Commissioners and franchise laws to consider. I want to tread carefully and will take my time.

SS: Tell us about a small business you admire.

MA: In my local community there is a small business that really stands out—Walsh’s Pharmacy at South Maroubra.

It’s in a pretty tough part of Sydney near a big housing commission estate. Two brothers run it and it is a very friendly place. One of the brothers is usually there. They have great trust with the customers and treat people like part of their family.They put on events for the local community. I know of an art show, Christmas carols, they’re involved in sponsoring fun runs. In terms of community interaction their work is incredible. They also have services for new mums.

It is a successful business but at the same time they make Maroubra a better place to live.

SS: Once again, the Australian Bureau of Statistics has shown that the majority of businesses in Australia are non-employing businesses. Is it time to change the definition of a business, given that so many of those non-employing businesses are sole traders or independent contractors?

MA: Definitions are a very, very difficult because the small business sector is so diverse. You go from micro-business, sole traders, partnerships right up to incorporated companies. At the heart of everything is enterprise—that is the most important term, because these are enterprises that are generating wealth and jobs.

SS: But a sole trader doesn’t generate wealth or jobs. If the sole trader is hit by a bus, there’s no residual value.

MA: There are a lot of contractors who work for labour hire companies or job agencies and would consider themselves an enterprise. Part of it comes down to how the individual sees themselves and part of it comes down to how they structure their tax.

I think we need to be careful not to be too prescriptive. I want to make sure all Australian businesses and contractors get access to tax breaks.

SS: I understand you’ve met with SME Association of Australia CEO Caroline Hong. What’s your impression of the new organisation?

MA: Caroline is a livewire and has a lot of energy that I like!

I think the organisation fills a big hole in our economy because while we talk a lot about small enterprises, a lot of medium enterprises miss out. We need to make sure that their importance to the Australian economy is recognised and we don’t want them to miss out on government support.

The second thing that impressed me was the Association’s vision in terms of creating greater links to some of the Asian economies. As the Treasurer has said, in the past Australia has been in the wrong part of the world. For the first time we are in the right place at the right time.

The future for business in this country is to try to tap into the growing middle class of Asia, not just providing minerals—we have services and expertise.

We need to be working at the high end in terms of technology and higher education to sell our wares.

Once the NBN is in place we will be able to do it properly because it will empower business in all parts of the country. You won’t need to be in Sydney or another capital to do business with the world.

&VIEWS

SECTION HEADER

NEWS&VIEWS CAROLINE HONG I’ve worked in the health sector and know men and women in that industry deserve equal pay

Caroline Hong CEO of the SME Association of Australia.

Caroline can be reached at info@smeaustralia.asn.au, where she welcomes comments on this column. www.smeaustralia.asn.au www.twitter.com/#!/SMEasnAU Join us on Linkedin Discussion group SME Association of Australia-SME Forum www.linkedin.com/groups/SMEAssociation-Australia-SMEforum-4213012 www.facebook.com/ SMEassociationAustralia 8

MAR 2012

Equal Pay Equals Opportunity

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he February 2012 decision by Fair Work Australia to grant large pay rises to many in the community sector is a fascinating moment for business.

This applies to the social, community and disability services industry throughout Australia.

As I see it, the case centred on pay rates for workers in the community sector, especially in occupations like nursing and caring.

My Business Editor Simon Sharwood last year met with the Equal Opportunity for Women in the Workplace Agency, which works to ensure equal pay for women. The Agency explained how largely feminised occupations tend to pay lower wages, in part as a hangover of old attitudes that women deserved lower pay. Even when occupations like nursing require years of tertiary study, pay rates remain below those on offer in occupations that require equivalent qualifications.

My reading of the situation is that the Australian Services Union, which brought the case, wanted to iron that bias out of the wages offered to its mainly female membership so that their wages became closer to those paid to other public sector employees with similar qualifications and duties. That’s a position that is very hard to argue against. Furthermore, I’ve worked in the health sector for many years and know from firsthand experience that men and women in that industry deserve equal pay.

Yet it’s also not hard to see that the headline outcome from the case—a pay increase of 40 to 65 per cent over eight years—is challenging because it involves pay rises way beyond inflation.

The fact that many of the workers covered by the decision are in the public sector won’t be a salve—the money has to come from somewhere and we all know where governments get their money from.

It is also worth considering the wider impact on Australian businesses.

Our ageing population means that we’ll need more of the kinds of services the

workers who’ll receive this pay rise provide.

We all know that baby boomers are retiring in growing numbers and that retirement savings policy has been developed, in part, to make as many retirees as possible at least partially self-funding.

That means many retirees will be encouraged to use private firms for aged care and other medical services. The private sector will need to match these wage rises, so costs will rise and retirement savings may not last as long as hoped or planned.

Private companies—many of which are SMEs—will therefore find this decision by Fair Work Australia very challenging.

Smart entrepreneurs will also feel it creates opportunities. Every disruption to an industry means new chances emerge to do things smarter.

I expect that SMEs will do so in this industry to meet this challenge and that the result will be vibrant companies that help Australia to prosper.

I also feel that the logic of this decision is right. SMEAA’s mission is prosperity for Australia through successful SMEs. A great many SMEs are started by women and SMEs employ many women.

Recognition that women’s skills are worthy of the same remuneration is surely and simply just the right thing to do in a society as wealthy as Australia.

I hope every SME recognises that position and also recognises that we cannot collectively ignore women workers. We all know how hard it is to find good staff. We all know how hard it is to retain staff.

Many employers I speak to who take the extra step to offer genuinely flexible working practices tell me that women appreciate that practice and become more engaged, more loyal employees when offered the chance to achieve a good balance between work, life, and a role as a primary carer.

This pay rise may, I hope, accelerate that process by encouraging greater workforce participation by women. That will in turn keep their valuable skills in the workforce for longer, and that will benefit us all.

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NEWS&VIEWS BRAD SUGARS Discounting will bring lower profits and harder work

The high cost of discounting

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ere’s a fantastic business strategy you can put to work right away to guarantee lower profits. It will also make you and your team work harder than ever before just to break even. If that doesn’t sound appealing, then make sure you commit to a simple two word mantra for the rest of your business life: “never discount”.

Just to illustrate this, I’ve included the table below, which we continually use to coach business owners out of the discount game. It shows very simply the amount you need to increase your sales by to compensate for any price discounting strategy.

For example, if your margin is 40 per cent and you reduce your price by 10 per cent, you need your sales volume to increase by 33 per cent to maintain your profit.

Is this a winning strategy for any company? No.

The alternative to discounting Instead of discounting, give these tactics a try. Learn all of your numbers so you have the knowledge and clarity (which boosts your confidence) to set your prices to allow for great margins, then courageously hold them by developing a very clear and concise value proposition for your customers.

Find low-cost or no-cost ways to increase and enhance the overall buying experience, especially if you are in an industry that has defaulted to discounting as the conventional way of doing business. In reality, the higher the perception of a product or service as a If your present margin is:

20%

And you discount your price by:

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

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MAR 2012

30%

commodity, the more opportunity there is to create both legitimate and perceived points of difference with what you can offer.

Train your salespeople to dig deeper to find the true reasons for not buying, rather than reflexively reacting by cutting price. Yes, this may take more training and patience, but the payoff long-term will more than cover the short-term inconvenience.

Whatever you do, think twice about running a “10 per cent off sale.” Cut out the discounting chart below and post it in a highly visible place to remind yourself how much pressure you’re putting on your numbers, your team and yourself when you play the discounting game.

Instead, think in terms of how you can grow your services, how you can create a better customer experience, or how you can simply lop off the bottom 80 per cent of your “C” and “D” customers who are only interested in cutting you down on price.

Then, you can focus more on the top 20 per cent of “A” and “B” customers who drive the success of your business.

When you discover new ways to cater to those customers, you’ll never need to discount again. Except the amount you’re currently spending on marketing campaigns.

Why? Because if you focus on those who deliver the most profit to your bottom line, you’ll have the start of a true referral-based business—one that relies on effective wordof-mouth advertising—which just happens to be the least costly and most effective type of marketing you could ever “buy.”

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“There is an unknown period of time during which credit card companies or banks know a card is lost or stolen, but retailers are still liable for purchases made with the card.”

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MAR 2012

hen Mel Barassi realised that customers had defrauded her using stolen credit cards, she says she felt “violated”.

Barassi runs The Hip Infant (hipinfant. com.au), an online store that sells cute products for little kids. The store is sufficiently successful that many of its clients come from overseas, but some of those have turned out to be crooks.

“They order all sorts of sizes and ask for delivery to Singapore, sometimes with a home address in Nigeria,” Barassi says. “The orders are always for around $300 of goods and are in lots of sizes.”

Barassi screens these orders carefully but like any small business is also keen to provide prompt service. She also trusts the online payments gateway provided by her bank, Westpac.

“My understanding was that every credit card transaction is checked,” she says. “I’ve learned that’s not the case,” as several transactions that passed through the payment gateway were later cancelled by the bank because the credit cards were stolen. The cancellations came after she had shipped the goods, leaving her out of pocket for her goods, postage and – in a final insult – a $30 fee the bank charges for handling a dud credit card.

Barassi thinks that’s unfair.

“If I see an order come through and it

seems suspicious we email the customer and try to figure it out, but there is not a phone line you can ring and it is a big effort to check. A lot of it comes down to gut feeling.”

“The Bank says we should ask for a copy of their driver’s license but you don’t want to invade a customer’s life like that. And I certainly don’t think the bank should be charging us $30 for the pleasure.”

Kathie Thomas has had similar problems.

Thomas sells books online and recently noticed a pleasing surge in orders.

“It sometimes happens when a bookseller runs a promotion,” but in this case the pattern of orders started to get a little odd.

Thomas checked the source of the orders, which seemed legitimate or at least not much different from other sites that had signed up as affiliate sellers of her books in the past.

But things soon got weird.

“A few weeks later I got an email from someone saying I did not order this book and why did you send it to me? Her husband had died and the book had been charged to his credit card. Then I got a letter from National Australian Bank (NAB) with a chargeback fee and asking for proof of the order. That’s when I found out the email address being used on the orders was not the real email address.”

Several more chargeback letters

COVER STORY

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australia’s retailers are told credit cards are safe, but banks & card companies still make them wear losses …even when it’s not their fault. followed and Thomas tried to contact all the “customers” who had “bought” books to make sure they hadn’t fallen victim to the same scam.

Along the way she asked NAB why its payment gateway had not detected and rejected the stolen credit card numbers.

“I asked if they match up information and they said no but we don’t advertise it.”

Why banks penalise merchants The transactions that landed Barassi and Thomas in trouble are called “card not present” transactions, a category of credit card purchase used for phone and mail order shopping. If card not present transactions go wrong, banks place the burden of proof on merchants, demanding as much paperwork as possible to prove the legitimacy of the purchaser.

Merchants are forced to pay for fraudulent card not present transactions and sales when stolen cards are used in store, even though the cards used may be stolen, a source of much anger among retailers.

“Anyone in retail from Coles and Woolworths down will tell you they are frustrated,” says Russel Zimmerman, Executive Director of the Australian Retailers Association.

Chris Hamilton, CEO of the Australian

Payments Clearing Association (APCA), opines that one reason for merchant frustration about being made to pay for goods with a lost or stolen card is that retailers are considered the best-equipped party to prevent fraud.

“What in principle the system is trying to do is work out who had the best chance of preventing the fraud in the first place and aligning responsibility with capability to act,” he says. “You can see it [fraud] in a physical environment more obviously – if the card has been used in store the person who used the card is defrauding the shopkeeper. The philosophy of the card companies is that neither the card company or the issuer is in a position to say if the person is being fraudulent whereas the merchant may be able to because the customer looks dodgy or the signatures don’t match.”

Thomas and Barassi, as online retailers conducting card not present transactions, never have the chance to verify a signature or ask for secondary ID like a driver’s license to help them make a more informed decision about a transaction, yet Hamilton says “I think they [card companies] translate their principles into the online world where it is harder to assess if the card is valid.”

Online retailers, meanwhile, can easily find promotions talking up the security of online payments gateways offered by banks.

My Business visited the websites of

each of the big four banks to see what they say about the security of their payment gateways. We also asked banks, and the three major credit card companies (Visa, MasterCard and American Express), how it is possible for secure payment gateways to permit purchases to be made with stolen credit cards.

The banks’ sites make simple and bold claims about security. The page for ANZ’s ePOS product says it offers “Real-time payment authorisation.” Westpac says its third party payment gateway provides “Fully authorised live transactions” and that “Westpac authorises credit card transactions providing you with an immediate approve or decline response.” NAB says, on the page for its “Hosted payment page” product, that the service “Automatically checks every card for available funds and whether the card has

The banks’ sites make simple and bold claims about security…it offers “Real-time payment authorisation.”

13

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COVER STORY

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credit card TRAP “The system is trying to work out who had the best chance of preventing the fraud and aligning responsibility with capability to act.” been reported lost or stolen at the time of the transaction.”

None make prominent mention what Hamilton says is the most common source of credit card fraud: criminals who use cards before anyone knows about their theft. This can happen when criminals acquire credit card numbers and choose not to use them for several weeks or months. On other occasions, consumers simply don’t notice a stolen card or pay insufficient attention to their credit card statements and don’t detect unauthorised purchases.

Merchants stung by fraudulent buyers under those circumstances are liable for any purchases, even though banks’ payment gateways approve them. Barassi and Thomas feel that is unfair, but the small print of at least one Bank’s merchant services guide makes it plain that an authorised transaction is no protection.

Passed to My Business by a source within one of the big four banks, the document is titled “Merchant Business Solutions. Protecting business against credit card fraud.”

In a section called “Authorisation”, the document explains that a transaction will be authorised when “The card has not been reported lost or stolen (although it may in 14

MAR 2012

fact be lost, stolen or compromised [card details improperly obtained or copied] and the card owner is unaware).”

The document goes on to say that “An authorisation does NOT confirm that the person providing the card number is the legitimate cardholder. The risk remains that the person providing the credit card number has either stolen or improperly obtained the card.”

Window of danger My Business does not know if other banks’ guides for merchants spell out this issue in similar detail, but we did ask each bank how long it takes for transactions to be refused once a card is reported stolen. None responded to the question.

American Express said “Once a card is reported stolen it is tagged by one of our customer care professionals (a term we use) and is immediately invalidated.”

Visa’s response to our inquiries offers some insights. The company told us that “Once an account has been identified as being used fraudulently or suspected of being compromised in some fashion the card issuing organisation loads details into Visa’s global authorisation system where it will be blocked from authorising all future electronically processed transactions.”

Window of doubt We pressed Visa to ask how much time typically elapses between reporting of a stolen card and its rejection by payment gateways and were told it happens “As soon as possible, however every situation is different and it will depend on the circumstances of each individual case.”

My Business took that response to mean that there is an unknown period of time

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between a card being reported as lost or stolen and notification to banks that the card should be rejected.

Banks and card companies did not define that window, and the the closest thing to an explanation we received came from a banking industry insider who said that “This is entirely an operational question for banks and card schemes.”

But the problem is real. ACPA’s Hamilton says transactions that make it through this window are rare, but the ARA’s Zimmerman is aware of it as a problem.

“There can be a lag time,” Zimmerman says. “Some of that lag time can do with local banks and banks overseas. But I think a card has got to be stopped on every machine, worldwide. There shouldn’t be a lag because if there is real-time processing for purchases it should be real-time for cancels too.”

Zimmerman has raised the issue, along with the penalties imposed on merchants under other circumstances, with the Reserve Bank through its Merchant Payments Forum of which he is Chair.

Other industry bodies are also concerned about the gap.

Bruce Linn, Chair of the Internet Industry Association, was personally involved in early online credit card processing efforts and says he is concerned that today’s schemes seem not to have become more sophisticated.

“More legacy processes and systems and procedures are taking longer than they should to become appropriate to the online world,” he says. “The same is true of legal and regulatory frameworks.”

“At a general level we would have hoped that credit card authentication would capture lost and stolen cards, and if things are online you would expect them to be real time.”

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COVER STORY

HowOneBusiness

Survived AWebsite Hack

Rahul Bagharva spends about $5000 a month on Google AdWords and relies on the service to drive traffic to his outdoor signage businesses RollupSigns and Bannerchain. So when the sites went offline it was a heavy blow.

“We get 50 to 60 hits a day from AdWords,” Bagharva says, with the steady stream of inquiries from online advertising helping the company to grow beyond steady clients like Subway, Pepsico and Diabetes Australia.

But in January 2012, when Bagharva was holidaying overseas, the websites stopped working.

Google explained why – the sites had been infected by malware and Google suspended Bagharva’s AdWords campaign to protect unsuspecting users. Web browsers also detected the malware and warned visitors that the sites were dangerous places to visit.

Bagharva’s outsourced IT team quickly identified the source of the problem: malware had been uploaded to his sites with the tool intended for uploads of custom art for signs.

Removing the malware and repairing the sites took more than a

16

MAR 2012

day and represented unwelcome and unplanned costs. Eventually the sites came back online and Bagharva had to make his case to Google for reinstatement of his AdWords campaign. Google was understanding and acted within days, but also said it has a dim view of sites whose security is compromised.

“We don’t have the power to pull strings to make it faster,” Bagharva says, but also praises Google for offering a dedicated customer service line staffed by actual humans.

Bagharva now plans to change the hosting company he uses for his websites, as it proved hard to work with his US-based host.

He is also considering action against his current host, given its assurances of a secure service proved false. “We reported it to the guy who looks after the hosting company,” he says, but has not pressed hard for resolution. “These things take time especially for a small business like us.”

At least the sites are back online and producing new leads, a fact for which Bagharva is grateful.

“Overall the web is a big positive,” he says. “We just signed up for Twitter and from now on our business will be focussed more towards the website.”

7

My Business asked seven leading security companies to offer their advice on important security issues

critical security questions

What tactics are cybercriminals using to Target SMEs? Answer from Alison Higgins-Miller, Vice President Asia Pacific Sales, Websense

S

MEs should not take comfort in the fact that cybercriminals focus mostly on larger enterprises. Cybercriminals want anything of value—from personal bank account information to classified data. They take advantage of security gaps and exploit employee error. And as larger enterprises move towards more effective real-time defences, SMEs become the new lowhanging fruit.

The web is the main attack vector, especially in blended attacks that see an email arrive containing a link to a malicious website. The user lands on the site and criminals lurk where users gather, luring unsuspecting users while they browse social networking sites.

SMEs should also be concerned about Advanced Persistent Threats (APTs) too.

These were all the buzz last year, and even though they target governments and big businesses, a million-dollar, well-planned, high-profile attack can quickly become something that low-level hackers can use.

With such sophisticated exploits spreading this way, the odds are high that masses of business will fall victim to an attack at some point.

In 2012, Websense anticipates three main trends that will impact SMEs: First, your social media identity may prove valuable to cybercriminals. If a bad guy compromises your social media credentials there is a good chance that they will infect your friends and colleagues too.

Second, expect more blended attacks that propagate through social media networks, mobile devices, and through the cloud.

Third, watch for attacks targeting mobile devices such as tablets and smartphones.

Businesses need real-time security

defences that prevent users from visiting what they believe are trusted links and that stop cybercriminals from stealing confidential data.

What security precautions do small businesses need to take in order to protect their servers and other technology infrastructure?

Answer from Trevor Iverach, Solution Practice Lead—Security, CA Technologies

I

t is important for small and medium businesses to understand that security attacks are not just limited to larger organisations. In fact, attacks on SMBs are on the rise. In order to minimize the risk of attack, SMBs must evolve from a basic layered security approach to a more datacentric approach.

This is not to say that the layered security approach is redundant. In fact, it is still crucial to SMBs. Investment in anti-malware, firewalls and threat-based technologies are still an important deterrent to external or internal threats. These tools may be the first lines of defence in protecting technology infrastructure.

Considering what is happening with an organisation’s data is also a key defence mechanism. It is increasingly important to ask simple questions like: does your business know where your most important data assets sit? How is it being used?

Where and how does it move around the organisation? And can I provide controls around that?

Consider a medium-sized business in which private financial information held by the company is stored on a shared server.

Alison Higgins-Miller It is important to regulate who is able to access this information and when, by putting strict controls in place over access to it—for example, providing warnings or barriers when unauthorised access is attempted. With these type of data-centric security measures, organisations of all sizes will further limit the risk to their most crucial assets.

Depending on the size of the organisation, identifying these privileged users can be a manual process or an automated and controlled one. Either way, a very important aspect in avoiding a breach is to focus on securing the data and the access to it.

Question: What threats, if any, do social networks pose to small business and how can they protect against them?

Answer from Michael McKinnon, Security Advisor at AVG (AU/NZ)

S

ocial Networking sites are amazing tools for communicating on a very personal and often emotional level with close friends and family, and it is when we’re in this vulnerable state that they also create the perfect environment for connecting us with fake stories and links to malicious content from scammers and tricksters.

The major issue with threats in Social Networking, apart from us vulnerable users, are the risks associated with clicking on malicious web links combined with web browsers that can be exploited. To defend against these types of attack, it is critical that the first line of defence be at the web browser on the desktop, laptop and all mobile devices.

Larger businesses often add expensive technologies to monitor, block or scan 17

COVER STORY Trevor Iverach

“Considering what is happening with an organisation’s data is a key defence mechanism.” access to common Social Networking sites.

Many small businesses usually make do with Internet connectivity solutions and their use of social networks escapes any scrutiny, which puts them at a disadvantage.

We always recommend keeping operating systems up to date with the latest patches, plus the use of an Internet Security solution that scans web content actively to prevent known malicious content being accessed.

These two tactics should stop the nasty consequences that can arise from the malicious links used on social networks, which include data or identity theft, fraud or reputational damage.

How can small business owners protect mobile devices like smartphones and iPads to prevent them bringing extra risks into the organisation?

Answer from Andrew Mamonitis, managing director Kaspersky Lab Australia & New Zealand.

M

obile devices, specifically smartphones and tablets, are the new frontier for cyber criminals when it comes to attempting to access your organisation’s network.

An employee’s tablet spans the divide between work and personal activities, for example the same device that hosts sensitive work documents can also be used to access social media sites such as Facebook and Twitter.

Tablets and smartphones are vulnerable to a similar range of attacks that currently affect desktop computers. This can include the installation of malicious programs, theft of confidential data and the use of compromised mail accounts to distribute spam. Criminals use several different tactics to gain access to mobile devices including, key logging malware inserted into popular apps, Trojan malware in text and email messages and mobile bots amongst others.

It’s important for SMBs to develop a unique security strategy for mobile devices.

Strategies for management can include: 18

MAR 2012

• Software that protects all mobile operating systems Mobile devices run a variety of operating systems including Apple’s iOS, Google’s Android, Microsoft’s Windows Phone and Nokia’s Symbian. Look for software that supports protection for these operating systems and ensure that all new devices brought into contact with the corporate network are protected.

• Best practice protocol Develop standards that are easy to follow and well explained, staff of all technical knowledge levels should be educated on the procedures they need to follow when using a mobile device to access the business network. This should form part of a new employee’s orientation, to ensure best practice security is used from day one.

• Avoid complacency Stay updated on trends, new threats and updates from your security provider is crucial to fending off attacks from cyber criminals. The latest tactic used by criminals could very well be the next attempted hack you experience

Question: How can small business owners protect portable computers and prevent them bringing extra risks into the organisation?

Answer from Glynn Stokes, Product Marketing Strategy, Trend Micro ANZ

L

aptops can be a major vulnerability in a number of ways. According to an IDC report last year, 45% of SMB managers and employees reported a laptop theft, and an average of 2.2 laptops were lost or stolen from each firm every year.

But there are several practical measures you can implement to safeguard your company. Travelling is obviously a vulnerable time. 900 laptops are lost at London’s Heathrow Airport every week. A laptop is a prime target for opportunistic thieves and you can minimise the travelling risk by avoiding using a laptop bag, and instead

use a backpack or tote bag to make it less conspicuous.

Never leave your laptop unattended and be careful when putting it down. Even in cars, make sure the laptop is out of sight.

There are several ways to protect the information residing within the laptop.

Passwords should be robust and complex.

For the strongest passwords, don’t use words at all. Use random letters, numbers and special characters.

Encrypting data adds an additional level of safety, while making backup copies of the information is also a basic precaution.

Firewalls and antivirus software are essential safeguard technology. The best security software will go beyond standard protection and will reside on the computer without hindering the performance of your laptop or network. It will protect you no matter where you are and encompass identity theft, risky websites and hacker attacks within a single solution.

Care should also be taken when connecting to public wi-fi networks.

People are a critical factor in the security equation, with up to 80% of all data loss caused by human error. Employees should be aware of rules of behaviour and best practices to protect information. Let them know it’s their job to reduce the risks with their vigilance.

How can small business owners protect their wireless network connections, both WiFi and wireless broadband?

Answer from Scott Robertson, Vice President Asia Pacific Channels and Alliances, WatchGuard Technologies

S

mall business owners would be well advised to follow four simple steps to ensure that their wireless network connections are protected from cyberthreats: Step 1: WiFi security should start with the hardware itself. Businesses should ensure the devices they use are modern and support the latest security protocols

COVER STORY

Scott Robertson such as Wi-Fi Protected Access (WPA) and WPA2. Older protocols like Wired Equivalent Privacy (WEP) should never be used today.

Businesses should certainly not leave the network ‘open’. Also, learn how to update ‘firmware’ - the software that powers a device - to keep it current and prevent hacks.

Step 2: Take time to read the manual. Many devices ship with very insecure defaults. At the very least, the default admin password should be changed. Be mindful of choosing a strong encryption key and be prepared to change it at least annually. MAC address filtering and certificates should also be considered for critical information access.

Step 3: Consider employing a second level of authentication (beyond just connecting to the wireless network using WPA/WPA2), such as a VPN or login technology. This can also be used to capture exactly who accessed what and when, should any breaches occur.

Step 4: Consider the interface where the Wireless Access Points (WAP) meet the wired network. Wired and wireless networks may not require the same level of access – perhaps the wireless network could be restricted to internet access and just one or two applications. Intrusion Prevention Systems (IPS) can also be deployed between wired and wireless networks, to protect against any vulnerabilities. Unauthorised access point detection, sometimes also known as Wireless Intrusion Prevention Systems (WIPS), should be used to discover any access points that

BIG SECURITY SOLUTIONS AT A SMALL PRICE

have been installed without consent or proper configuration, even if there are no wireless networks normally employed.

What is the best way to reduce the risk of malware infections or other security incidents which arrive by email?

Answer from Adrian Covich, Systems Engineering Manager, ANZ, Symantec. cloud

E

mail is one of the most popular tools for cybercriminals looking to infiltrate the business network. It provides them with a direct method for targeting employees with malware, which often takes the form of malicious attachments or links to malicious websites.

If this malware is activated, cybercriminals gain access to the business network – enabling them to access confidential information which they can sell on the underground economy.

Email cybercrime is rife, with Symantec’s January Intelligence Report finding that the global ratio of email-borne malware was one in 295 emails.

Additionally, the global spam rate rose by 1.3 percentage to 69.0 per cent (1 in 1.45 emails) and the global phishing rate stood at one in 370.0 emails.

Given the high volume of email carrying security threats, especially when it comes to spam, it is important for SMBs to have

solid defences in place.The best approach is to combine a solid security solution with employee education, to manage malware from both a technological and a behavioural perspective.

When it comes to technology, SMBs should look for solutions that provide a spam filter in addition to identifying and blocking email borne malware.

A cloud solution is a good option as it enables SMBs to hand over email security to experts, allowing them to focus on running the businesses.

Cloud security vendors tend to use real time filtering services that provide them with a second by second view of changes in the threat landscape, enabling them to deliver protection against both established and emerging threats. The best services offer 100% protection by blocking emails that bear malware before they enter an employee’s inbox.

Additionally, SMBs should double up their defences by educating employees about email security issues. Remind employees to avoid opening unexpected messages from unknown senders; it is best to exercise caution when it comes to unsolicited messages.

Additionally, employees should avoid clicking on unidentified links or opening unexpected attachments - it doesn’t take much for a user to be tricked into compromising the business network, with dire results.

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19

FINANCE

LOVE the bank you’re with Thanks to out-of-cycle mortgage rate rises, many Australians are looking for a new bank. But banking expert Neil Slonim says now is not the time for businesses to make a move.

T

he Stephen Stills song from the 1970’s “Love the One You’re With” best encapsulates the approach businesses should adopt with their banking relationship in the current challenging economic environment.

Now is definitely not a good time to be looking for a new banking relationship.

Businesses will almost invariably do better with their incumbent bank than they would if they were to switch to another bank.

Banks are finding it increasingly difficult and expensive to raise funds so the limited funds they do have are deployed to get the most bang for their buck in terms of return but even more importantly in credit quality.

Whilst a bank can increase its revenue by taking on higher risks and charging accordingly, preservation and protection of capital are more critical. Banks are already highly geared businesses and accordingly can ill afford further blows to their capital bases, besides higher margins never compensate for a bad debt.

Whilst banks are restricted in the funds available to lend they and the markets still hold expectations of increasing shareholder returns. In these circumstances banks tend only to lend where it is absolutely safe which usually means quality existing customers with a strong record. These fortunate businesses have little difficulty in accessing credit on competitive terms and conditions.

However if your business is not seen by the bank as being top quality, life is much tougher. Decisions can take an inordinate amount of time and the hurdles which need to be overcome often seem insurmountable.

20

MAR 2012

Given the difficulty in accessing funding at pre-GFC levels and pricing combined with the current uncertainty in the global economy as well as heightened prudential and legislative requirements such as Basel III, it is no surprise that banks have become so careful about ensuring their limited capital is safely and securely deployed.

“Writing a loan which turns bad can be a career inhibiting event which all bankers wish to avoid.”

New banks aren’t nicer But if you think it is tough dealing with your current bank, don’t for a moment think that changing to a new bank will satisfy all your needs. Currently banks are loathe to take on new lending from other competitors.

The very first question asked by the credit managers when a business is looking to refinance from another bank is “why are they leaving?” If there is even a hint that the business has been or could be in some difficulty the conversation goes no further.

The banks’ default position is that if a

business is looking to switch there must be something wrong and the onus is placed on the relationship manager to prove this is not the case. Some find this process tedious and frustrating and ultimately do not approach winning new business with the same level of enthusiasm as perhaps they displayed some time back.

This behaviour is also reflected in or perhaps driven by the changes in the incentive systems employed by banks.

Banks generally adopt a philosophy that the easiest and quickest way to change the behaviours of their bankers is to put a financial reward or disincentive around certain outcomes. In recent years, banks have rewarded the relationship managers who sold the most loans. Luckily the rising market camouflaged many poor lending decisions.

Now that the tide has gone out and it is apparent who has not been wearing bathers the banks have shifted their focus away from rewarding new lending and more towards protection of and return on their capital base.

This means that bankers’ key performance indicators are now skewed more toward the quality of their loan book and the return on equity generated by those loans rather than the volume of loans written.

Watching their backs These days writing a loan which turns bad can be a career inhibiting event which all bankers wish to avoid. So when it comes to prioritising between the bank’s balance sheet, the banker’s career and the customer’s needs it is a pretty simple

FINANCE

equation. Even if the relationship with the bank has ebbed and flowed, borrowers should not lose sight of the value of a track record. Whilst many business people believe that history with a bank doesn’t count anymore this is not necessarily so. Whilst history and reputations may not count for as much as they once did, it is far better to have a good history than not.

On the other hand “bank hopping” in which a business moves from bank to bank often chasing often for small reductions in margin, can easily damage both parties because it does not allow for time to establish a track record which can help a bank make the best possible decisions.

The strength of a banking relationship becomes apparent not in times of steady earnings and asset price growth but when the going gets tough. Being able to work with a bank through tough times does count for something and if a bank has this kind of history with a customer, it is more likely to be supportive during challenging times. Equally the converse also applies.

The exception to the “Love the One You’re With” rule is where the existing relationship has become so toxic that there is really no choice but to look elsewhere. But given that it is unlikely that any new bank will take on such a relationship, the borrower may have to restructure the arrangements

in order to attract a new lender. This could involve reducing debt by selling assets or the injection of new capital or subordinated loan funds. Alternatively, the borrower may need to provide additional security to give the new bank comfort.

Either way this process will be difficult and time consuming but if a banking relationship is irretrievably broken down, the sooner the borrowers begins the process of finding a new bank the better off they will be.

If the relationship has not irretrievably broken down but is less than ideal, the following steps may help a business to improve its standing with its current bank: See breakout below

sTeps to better banking $ The best way to get love returned from your bank is to perform and when you do perform, make sure you tell the bank. $ The best way to lose love from your bank is to fail to keep them informed. A poorly informed banker is a dangerous proposition although not quite as dangerous as a misinformed banker. So if you have news, good or bad, don’t hide it from your bank.

$

Even if you are not accustomed to giving the bank bad news, understand that the banks receive bad news every day and it is more significant to you than it is to them. So if you do have bad news, report it promptly, explain why it has occurred and most importantly present your plan for addressing the problem.

$ Don’t ask for anything unless you really have to and when you do, make sure you are fully prepared with a business plan supported by three way profit & loss, cash flow and balance sheet forecasts

About the author: Neil Slonim established Slonim Consulting in 2008 to help companies build better relationships with their banks. After 25 years in senior leadership roles with NAB he now leverages his experiences and connections to bridge the relationship gaps which exist between companies and their banks. Slonim Consulting has also achieved success for clients in family business counselling, resolution of partnership and creditor disputes, capital raisings, expert witness report and corporate governance. www.slonimconsulting.com.au 0414 440 866 21

FINANCE

Soft landings Europe’s economy is precarious, the USA’s recovery is anaemic and retail trade in Australia ground to a halt last Christmas.

Here’s how to prepare your business for a soft landing in case the global economy crashes.

Story by Simon Sharwood

A

manda Tallent’s business is growing strongly, but she’s just decided to place some orders a little later than usual and make sure she has plenty of cash on hand.

The reason? Global economic strife that has Tallent, founder of Bennetts Boots, feeling cautious.

Bennetts Boots is an online store that sells wide-calf boots for women with legs that are too large to fit boots sold in mainstream shoe shops. Tallent pays a contract manufacturer to produce the boots and usually places her largest order in October for delivery in February. This year, she held back that order by two months to run down her inventory and keep enough cash in the bank to fund her marketing activities, just in case global economic gloom slows sales.

“We would usually get the warehouse full, but this year we are going to wait and gauge demand a little more accurately,” Tallent says.

Tallent’s tactics to stay liquid ahead of possible financial difficulties are, experts say, just the kind of thing other businesses should be considering as the world moves into stormy economic waters.

“Having a plan brings peace of mind,” says Andrew Graham, National Head of Business Solutions for accountancy and 22

MAR 2012

business advisory firm RSM Bird Cameron.

“If you have a strategy or plan B you know what to do if a crisis happens.”

Graham says paying close attention to cash flow is the first step towards creating a plan that will help you make a soft landing.

“Chase all the money you are owed,” he advises. “Start quarantining old debt by putting people on new payment plans or insisting on cash on delivery.” If you put a customer on a payment schedule, have it set up as a regular, automatic payment from their bank account to yours instead of relying on the customer to “remember” when it is time to write you a cheque.

Protecting cash flow also means looking at your outgoings and Graham recommends being smart about when you make payments. “Consider things like commissions and only pay them once you’ve received payment,” he advises. Finding opportunities to slow payments to suppliers is another tactic. “If possible, extend and re-negotiate terms,” he advises.

Banking and finance expert Neil Slonim says the calm before a financial storm is a good time to ask suppliers for discounts, or sell at a discount yourself. “If things are slow, Chinese factories are overstocked too,” and you can ask for discounts. Doing the same yourself will turn slow-moving stock into cash.

FINANCE

How bad is the world economy?

In January 2012, Christine Lagarde, Managing Director of the International Monetary Fund (IMF) delivered a speech entitled “Global Challenges in 2012.”

The speech was blunt, warning that the world risks “…a ‘1930s moment’. A moment where trust and cooperation break down and countries turn inward. A moment, ultimately, leading to a downward spiral that could engulf the entire world.”

The IMF also issued its annual World Economic Outlook Update, a document whose opening paragraph declared: “The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere. Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated. Global output is projected to expand by 3¼ per cent in 2012—a downward revision of about ¾ percentage point relative to the September 2011 World Economic Outlook (WEO). This is largely because the euro area economy is now expected to go into a mild recession in 2012 as a result of the rise in sovereign yields, the effects of bank deleveraging on the real economy, and the impact of additional fiscal consolidation. Growth in emerging and developing economies is also expected to slow because of the worsening external environment and a weakening of internal demand.”

The World Bank also has a gloomy analysis for the world in 2012. The institution’s Global Economic Prospects 2012 forecast warns that “The world economy in 2012 is set to grow by just 2.5 per cent, weighed down by ripple effects from the 2008 financial crisis”.

“The sovereign debt crisis in Europe, which took a turn for the worse in August 2011, coincides with slowing growth in several major developing countries (Brazil, India and, to a lesser extent, Russia, South Africa and Turkey), mainly reflecting policy tightening begun in late 2010 and early 2011 to combat rising inflationary pressures from overly-fast growth,” the Bank says.

“As a result, developing country growth for 2012 is now forecast at 5.4 per cent, the second lowest over the past 10 years. The Bank has also lowered its growth forecast for high-income countries in 2012 to 1.4 per cent and -0.3 per cent for the highincome Euro Area.”

The Bank also warns that “capital flows to developing countries have weakened sharply as investors withdrew substantial sums from developing-country markets in the second half of 2011, with gross capital flows to developing countries plunging to $170 billion, only 55 per cent of the $309 billion received during the same period in 2010.” Developing nations therefore won’t develop as quickly as they have in the past, which makes the prospect of finding growth markets beyond Europe and the USA less likely.

23

FINANCE

Slonim also feels that the time to make tough decisions—like shedding staff or renegotiating loans—is now, to put your business in the best position.

SWOT up Peter Quinn, Director of Quinn Financial Planning, also recommends writing down a survival plan and suggests it take the form of an assessment of a business’ strengths, weaknesses, opportunities and threats.

“When we review the SWOT we suggest the business owner tie it into business objectives. If we have a client who says a second GFC would affect them because they are in retail, we’d suggest they revisit their product mix. If in the past you were

quality oriented and sold at a high price point you may need to review it as consumer behaviour changes.”

Andrew Graham also recommends finding new products or services to offset any decline in revenue brought on by financial crises.

“One of the things we are suggesting is to look at current revenue streams and go through those in detail almost line by line and see what is in growth what is in decline and what is stable,” he suggests.

“If there is leakage, ask how you will replace lost revenue.”

“Thinking outside the square to become a problem solver helps. We are trying to get our clients to become problem solvers

for their customers. Try to anticipate issues customers are facing for which you might supply a new product or service, rather than changing your product mix.”

Review your relationships Neil Slonim says that now is also the time to make sure your business relationships are in good order.

“Make sure your staff, suppliers and customers will stick with you even though others may cut their prices,” he says.

Peter Quinn says you should also review any relationships in which you act as guarantor on a loan.

“Review your guarantees before the review is forced on you. Look at leases,

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MAR 2012

6/09/2010 4:36:35 PM

FINANCE

“Chase all the money you are owed.

Start quarantining old debt by putting people on new payment arrangements or insisting on cash on delivery.” overdrafts and loans. I’ve seen businesses decline by only five or ten percent and then the guarantor has to step in. If that’s your father, he’ll have to make good. You can avoid that—or being locked out of your shop—with early intervention.”

“Sometimes you can run away from the problem, but when you have loans you cannot put your head in the sand,” he concludes.

“Develop a plan B, whatever that is,” says Neil Slonim. “Sell earlier rather than later.

Don’t leave it to the Bank to sell you up.

There are no new ways to go broke, so get a plan and do the basics now.”

That’s just what Bennetts Boots’ Amanda Tallent has done, and while she is still a little nervous about the coming year’s trading, she also feels optimistic that her business can weather the storm.

“I think we have got the product right,” she says. “Our customers love it and most own two or three pairs, which is a big investment in a $200 to $300 product.

There’s also so much growth in the product.

Athletic women are only just starting to hear about us and when we find new markets we can have big booms.”

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FINANCE

Private equity as a succession strategy Private equity could offer you a chance to realise the true value of your business, says Andrew Petering.

26

MAR 2012

I

f you own a business and you’re immortal, then you can stop reading and skip to the next article. If on the other hand, you are mortal and your succession plan is less than watertight, this article may give you food for thought.

There are approximately 11,000 companies in Australia turning over more than $10 million per annum. Of these, approximately two-thirds are owned by baby-boomers and many have no

succession plan in place. Without effective succession solutions, the chance of leadership disruption in these companies represents a significant business risk.

Finding solutions to deliver an effective and acceptable management transition is not always easy. As they approach retirement, many business owners face a difficult decision. How do they monetise their investment in a business they have spent a lifetime building? Doing so, while

FINANCE

also balancing the best interests of family and loyal staff, can present quite a problem.

Little wonder that many owners continually choose to leave this problem for another day while they get on with resolving more urgent issues in their business. But succession cannot be deferred indefinitely.

It is also worth acknowledging the emotional hurdle inherent in facing any decision around succession or sale of the business. To most business owners, the business has been their primary focus of attention for many years. There has been blood, sweat and tears shed over an extended period in building the company to what it is today. The thought of peeling yourself away from this can be very confronting. It can also be challenging to conceive of what will fill the void in the absence of such focus on the business.

to be answered. Is there someone ready and capable to take the helm? Not all good employees make great leaders.

Can the employees raise the money necessary to fund the acquisition? If you’re forced to contemplate taking an earn-out over time, do you want to take this risk and does this suit your personal requirements?

The risk that a competitor may look at several of your loyal staff as ‘cost synergies’ to be eliminated may also prove unpalatable.

4. Public listing of the company. The first point to note is a public float, or Initial Public Offering (IPO), is not a succession solution. In fact, institutional investors will be very focused on the stability and

Some solutions

“Selling your business to another company means opening your books to competitors you’ve spent years challenging in the marketplace.”

There are various options available to business owners looking to solve the conundrum around succession. However, not all of them provide answers to all the critical aspects.

1. Transfer to family. While this is often a dream for many family business owners, it can be difficult to implement in practice. How do you monetise your own wealth? Family are frequently not in a position to pay you what the business is worth. Are your children ready to run the business? Do they want to take on the responsibility of running the company?

Do they really have the appropriate skills to take the company forward? Although the concept of building a dynasty for your family is appealing, the reality may often be very different.

2. Sell the business to employees.

Selling the business to loyal employees may also seem like a good outcome.

However, a few key questions need

3. Sell the business to another company.

Of all the options, this one can be the most confronting. Frequently, the list of potentially interested buyers will be the same list of competitors that you’ve spent years challenging in the marketplace. Many owners have spent years believing their competitors have the wrong culture, poor strategy or ineffective execution.

Handing the business over to one of these competitors can be too much to contemplate for many owners. Just the due diligence exercise of sharing information with several competitors brings significant commercial risks.

Opening your books, sharing customer lists and introducing key staff to competitors are not actions that any business owner would happily rush into.

proven record of the management team.

This will likely involve management shareholders being restricted in their ability to sell shares as part of the IPO or in the period afterwards under strict escrow arrangements. In addition, an IPO is not an avenue open to all companies. The public markets require a certain level of scale and sophisticated levels of governance and reporting.

Many mid-market companies are not able to satisfy these pre-requisites. The appetite of institutional investors to support new listings is also notoriously fickle. Public markets refer to the “window” being open or closed when they refer to the current environment for IPOs. At present this window is well and truly closed to all but a very small number of exceptional businesses.

27

FINANCE

“A private equity firm can potentially offer more flexibility than other succession options.�

Private equity as an alternative

About the author Andrew Petering is a Managing Director of Wolseley Private Equity. Wolseley is a successful mid-market private equity fund with $350 million under management. Wolseley invests in Australian and New Zealand businesses with enterprise values in the range of $20 million to $100 million. The firm looks for opportunities to provide capital and strategic support to help companies grow. A large part of this is assisting companies with growth and succession solutions.

28

MAR 2012

Private equity (PE) is a term which describes pools of capital, managed by professional fund management teams, specifically to invest in unlisted companies. Investment criteria differ between private equity funds but primarily the focus is on holding equity investments with a view to add value over a three to five year period.

A transaction with a private equity firm can potentially answer many of the sticking points with the alternatives for succession discussed above. Firstly, private equity funds have readily available capital and are buyers of businesses throughout the business cycle.

They are also not direct competitors and the risk of commercially sensitive information being used against your company is therefore significantly reduced.

In addition, PE equity brings more flexibility in the array of solutions available.

For example, an owner may choose to sell a portion of the company rather than 100 percent. Selling a stake in the business can allow an owner to de-risk their current financial position while retaining an ongoing involvement in the business through a new or evolving role. This could include a phased succession plan to new management or an ongoing non-executive board role. As well as providing capital for growth, PE funds will bring a deep network of executive talent and significant experience to assist in developing a successful succession solution.

Private equity is also looking to invest in a company as a going concern and therefore typically is not looking to rationalise staff through operating synergies. As a result, the likelihood of major redundancies for your staff is also much lower. In fact, a PE firm

will often look to provide opportunities for key staff to participate in the equity upside as way of providing incentives and a strong alignment with the interests of shareholders.

Often all the infrastructure, systems and governance required of a public company may not be in place today. A PE fund can provide funding in a phase of development when the business may not be ready to be publicly listed. The PE investor will also assist in implementing the necessary governance that will be ultimately required for a successful public listing.

Accessing PE investment can also assist through delivering external experience and wisdom to assist in taking the company through a rapid growth phase or managing a significantly greater scale of operations. This experience may come through executives working in the PE fund, or alternatively from their networks of board executives and professional advisors.

A PE fund will most likely supplement the core skills of existing management.

For example, a management team may be highly capable of running the core business but less experienced in making acquisitions and then integrating them.

A PE firm is very used to the process of researching appropriate targets, undertaking due diligence, executing acquisitions and overseeing their successful integration.

Private equity investors tend to have a more flexible approach to how they invest and how a transaction is structured. In exploring the avenues open to you as a business owner, it is well worthwhile investigating whether private equity can assist you in successfully reaching your goals.

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MARKETING

Group buying

regroups After a sizzling 2011, the group buying industry is reinventing itself with new offers, new ways of doing business and new ways of targeting customers that mean you need to revisit its offerings and their impact on your business.

Story by Simon Sharwood

30

MAR 2012

D

ean McEvoy’s not especially hirsute, but in early 2011 he became an expert in laser hair removal. “Back then we did a lot of beauty deals,” says McEvoy, founder of group buying site Spreets.

McEvoy famously sold his site to Yahoo!7 last year and isn’t quite as interested in hair removal these days, as the group buying landscape has evolved fast.

“This space is, by its nature, so responsive to the market,” he says. “We run a deal and it either sells or it doesn’t.

The feedback loop in terms of what works is very quick.”

That feedback loop means that while 2011’s hot categories of beauty and restaurant vouchers remain constant, the hot action is now in travel and sales of physical products.

“We are learning more about the types of deals consumers are after,” says John Beros, a General Manager at Scoopon.

“Selling an overseas travel deal for $1000 was not something we thought possible in the early days, now we do it regularly. In the future we’ll also see a lot more oncein-a-lifetime type experiences and more aspirational offers.”

MARKETING

“ Some businesses said they were pressured by group buying companies to discount more or give more in a deal.”

That swift evolution of the industry means a feedback loop also operates for group buying start-ups, many of which are quickly disappearing.

“In early 2010 the industry did experience incredible growth,” Beros says. “Barriers to entry were low and at one stage there were 70 or 80 players in the market. In the second half of 2011 we saw a lot of consolidation.”

Steven Noble, a Senior Analyst with Forrester research, says some of that consolidation was not exits or acquisitions but “acqui-hires”, transactions in which established players buy a start-up in order to get experienced people. “We’ve seen this particularly when big players come in from overseas,” he explains. “They need people with experience,” and buying them is easier than hiring or training new recruits.

More consultation Experience is important to group buying companies because during 2011 the leaders learned that they needed to become more sophisticated and consultative salespeople.

One reason for the greater rigour was to distinguish themselves from the start-ups that sometimes played fast and loose.

“Responsiveness of deal companies

became an issue for vendors,” says Chris Jones from deal site JigoCity. “Often sales reps are compensated in such a way that all they want is your signature and then they are gone. But vendors want someone who will be more responsive. It’s important because if the customer has a poor experience it rubs off on the vendor and the site.”

Another reason was that some merchants need help to tailor their offers. “We know that the volume of response can overwhelm a merchant. We know they have to answer the phones,” says McEvoy.

Those needs mean Spreets has become more flexible with its revenue sharing arrangements, while it now ensures that merchants sign up only after a consultative process. This style, he hopes, will help the industry to mature and deepen merchants’ understanding of how group buying can assist their operations.

“Our focus this year is on providing value for consumers and merchants.”

Complaints Merchants need the extra help, says Jo Ucukalo, Chief Executive Officer of Handle My Complaint, because not all were happy with the outcome of group buying deals.

Indeed, Ucukalo says she noticed a spike in complaints about group buying midway through 2011.

“Some businesses said they were pressured by group buying companies to discount more or give more in a deal,” she says. Some struggled to deliver on deals, and she is even aware of some who needed to run a second deal to generate cash flow to fulfil their initial foray into group buying.

Customers weren’t always happy either.

The group buying industry established a code of conduct in 2011 and while it has generated fewer than 100 complaints, others are seeing more unhappy buyers.

A spokesperson from Consumer Affairs Victoria (CAV) told My Business that “Between January and October 2011, CAV received nearly 530 calls and complaints.

Enquiries and complaints peaked in September and October with nearly 100 calls and complaints each month. This is in comparison to 2010 when CAV received around 22 enquiries and complaints in regards to group buying.”

The organisation says many of the complaints it has received “are a result of businesses experiencing difficulty in being able to meet the demand created through

31

MARKETING

“85 percent of merchants say group buying is the best value advertising they have ever done.

They get a customer, on their bum, in their business and they only pay for it when it happens.”

group buying. The most common complaints about these offers include non-supply or delay in supply of goods or services, difficulties obtaining refunds and difficulty in booking services and redeeming vouchers.”

In some cases, group buying sites have gone out of business before consumers have been able to redeem vouchers.

Concerns about the industry were taken up by politicians, with Consumer Affairs Victoria now leading “a new national project by Australian Consumer Law regulators to work collaboratively to address the growing number of consumer complaints received about group buying and daily deals.” Every State and Territory has signed up for the project, as has the Commonwealth of Australia and even New Zealand.

The group buying industry’s response to customer complaints is to point out a very low ratio of complaints to deals sold.

“We sell a million coupons a month as 32

MAR 2012

an industry,” says Spreets’ McEvoy. “The percentage of issues or complaints is quite small. Spreets had fewer than ten complaints and we resolved every one of them.”

Scoopon’s Beros also feels the industry has responded well to consumer complaints.

“We have a very low barrier to entry,” he says. “Some companies paid a few thousand dollars for a website and they were in business. The point of the code of conduct was to publicise the way we go about everything because we want to create an industry that is around for a long time and not tarnished by the people who are in it for the wrong reasons.”

More start-ups, more marketing Group buying start-ups are, however, still emerging. Paul Serra runs one called SweetBusinessDeals, but will operate as an aggregator not a sourcer and spruiker of deals. “We were going to be a deals site

but the next thing could be aggregating business-to-business deals, rather than competing with other deals sites.”

Serra believes the market for businessto-business deals is in the same state as the consumer deals market was at the end of 2010—ready to explode. He also believes specialist deals sites are the next wave. “We’re seeing niche sites emerge,” he says. “Now there are just deals on travel, newborns, or for mums and dads only.”

Serra hopes that by aggregating those deals into a single site he can create a business which thrives on affiliate marketing fees from group buying sites. The dominant players will always be there and they have the massive databases needed to succeed,” he says. “But last year revenue from group buying was $450 million,” and he feels some crumbs can surely fall from the table.

But Serra’s plans may be dashed by the sophisticated marketing machinery now at the disposal of his larger rivals. McEvoy explains his company’s alliance with Yahoo!7 means he now sits atop a database of 1.5 million email addresses. That collection continues to grow and as it does Spreets uses Yahoo!7 data to better understand its members desires.

“We are cross-matching data. Yahoo!7 is really good at behavioural targeting and we’ve used that define a target we call the ‘gung-ho achievers’. They’re about 12 percent of the internet market and are high achievers who pack so much into their lives and are also highly socially influential.”

Deals targeting that market, he hopes, will snowball into the wider community.

“If we run a deal and then those people have a great experience they will tell the

MARKETING The group buying shakeout

world,” he says. “That’s what our focus has been—being more relevant to customers. If we do it right, it solves problems and merchants get folks who are more likely to become repeat customers and influence others.”

“85 percent of merchants say group buying is the best value advertising they have ever done,” he says. “This is the first medium that gets new customer, on their bum, in their business and they only pay for it when it happens.”

Estimates vary about just how big the group buying industry became during 2011. Some sources told My Business that more than 100 companies entered the market. Others put the upper limit at 80. What’s not in dispute is that only a handful are doing well.

Interviewees for this story said that between five and eight sites are now considered the leaders and collectively sell 90 percent of all deals.

Groupon, Cudo, Spreets, LivingSocial, Jump On It, Oufer, deals.com. au and OurDeal are held to be the “big eight” and their success has translated into deep pockets that mean they can provide consultative services to merchants that translate into better experiences for consumers.

Forrester’s Steven Noble says the creation of the group buying code of conduct was a mucle-flexing exercise by the market leaders designed to “separate them from the also rans.”

And the also-rans are running. Spreets’ Dean McEvoy says he has already been approached by smaller companies seeking acquisition.

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33

LEADERSHIP

t i t r t a i t S to exit S

Smart business people plan the day they’ll stop managing their business from day one, says Stuart Hayes.

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MAR 2012

avvy business leaders know their business is worth many times more if they are not required to work in it on a day-to-day basis. With this in mind, they arrange their entire business operations and affairs in ways that allow them to step away from operations quickly, and at almost any time. It’s known as “starting it to exit it”.

Of course, this does not mean that they will step away—they may love what they do—but that they can step away.

Importantly, it is having the option to move in or out of operations at will that both improves business value and provides expanded lifestyle choices.

Having said this, I am sure you will agree most discussions on the topics of exit or succession invariably centre on exit or succession planning.

While it is true that planning is important, recent Australian research* suggests that succession and exit plans are either not being embraced or that succession is not successfully occurring even when they are.

Not surprisingly, the reason for this is that a good plan means very little on its own.

Succession of leadership Before we explore why this is the case, let us compare two definitions of an exit plan,

LEADERSHIP

“Great leaders recognise that their role is to direct the course of a team, contribute to it meaningfully and then to hand it on to the next leader.”

the first being the common definition and the second my alternative: 1. The common definition of an exit plan, roughly paraphrased from Wikipedia, is: “… a way to transition one’s ownership of a company or the operation of some part of the company”; whereas 2. The Stuart Hayes ‘alternate’ definition (for private companies, at least) is: “… a way to transition one’s SELF from a company or its operations.”

More than anything, it is a business owner’s personal exit from day-to-day operations that is most important in precipitating succession success: it is what I call succession of leadership.

Achieving succession of leadership can be tough, particularly since many ownerfounders either won’t or can’t lift themselves out of day-to-day operational involvement easily, but it is possible.

Once an operational succession of leadership has actually occurred, achieving a succession of ownership or a generational succession within a family becomes a simple matter thereafter.

Widen your focus To achieve succession of leadership, business leaders recognise that the focus needs to be on much more than ‘planning’: succession of leadership is centred on change, both operational and in terms of governance. Not surprisingly it also introduces the concept of stewardship, which along with change is central to all forms of leadership.

Great leaders recognise that their role is to direct the course of a team (or business) for a period, to contribute to it meaningfully and then to hand it on to the next leader in a better state. This is stewardship, and great

leaders achieve it by teaching, empowering and fostering potential successors.

With this in mind, let’s look at how great leaders lead a succession or exit, using the four-step change model we have discussed in the past three editions of My Business:

Step 1: Ask the tough questions On the topic of exit, almost more than any other subject, it is critical for a business leader to engage a trusted and independent person to ask those hard questions that really need to be asked. The reason being, of course, that most of the hard questions that need to be asked are about them!

Consider, for example: • Is the leader the right person to lead the business at this point of its life?

• Is the leader blocking natural succession through the way they lead?

• What needs to be in place so the leader is not needed day-to-day?

• Is the leader delaying the start of their exit (or exit planning)?

• Is the leader relying on an exit strategy of hope?

My tip—Imagine you are a potential buyer doing due diligence. What would you see? What would

you value? What arguments exist that the business is worth anything, if the current owner is required within operations?

Step 2: Feel the reason Preparing a business so its owner has the option of departing at any time rarely occurs successfully, without also preparing the owner for the departure of their business as a way of life.

In this regard, for owners, it is important to find a reason or vision for the future that is strong enough to break the ‘parent-child’ type strings that often keep them involved in their business for too long. The reality is, owners who don’t find a vision they can feel and be driven by, frequently invent reasons to stay involved—valid or otherwise!

My tip—Communicating the business owner’s strong vision to staff helps them to buy into it and to realise things really can change. If nothing else, this will help them to support achieving it.

Step 3: Develop a simple plan Changing a business so that exit of leadership is achieved requires a strong ‘execution’ focus. This means the plans that support it are generally a great deal more

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35

LEADERSHIP

“It is important to find a vision that is strong enough to break the ‘parent-child’ type strings that keep founders involved in their business for too long.”

practical than a typical “succession plan”.

It also means there is little point in making any plans without a simultaneous commitment to executing them.

My tip—Consider the following four objectives and identify whatever execution steps are needed to ensure they can be achieved: 1. The business is not reliant on its owner/ founder in any operational capacity; 2. The owner confidently ‘owns’ the business, knowing it is in safe hands, produces cash and profit and their ‘ownership risk’ is managed; 3. The owner is prepared for ‘life after stepping away’; and 4. The succeeding leadership team is ready and understands their mandate to move the business into a new era.

Suffice to say, my experience in fixing failed successions has shown that non-operational or financially dominated successions fail more frequently because the owner’s exit was poorly led or did not take into consideration the execution requirements of each of these four areas.

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MAR 2012

Achieve positive and sustainable change Notwithstanding everything else we have talked about, the potent and irresistible fuel that enables sustainable change is the belief generated within a team when they see their leader actually deliver.

That is, the leader is visible in: 1. Developing, teaching and empowering emerging leaders; 2. Facilitating team ‘buy in’ by sharing their vision and passion for it; and 3. Keeping their personal commitment and sticking to the plan.

My tip—Regard the exit plans you make as a leader as a series of demands or requirements you are placing on yourself… and don’t wimp out!

*RMIT University research, as reported by Smart Company on 20 January 2012 www.smartcompany.com.au/ buy-or-sell-a-business/20120120family-owned-businesses-facingleadership-crisis-and-ignoring-successionplans-new-report-reveals.html

About the author Stuart Hayes is a Leadership and Business Trainer and Professional CEO who specialises in leading businesses through out of the ordinary circumstances such as rapid growth (including start-up), owner’s exit (including succession) and financial stress (including turnaround or business recovery). During the past 15 years Stuart has acted as a CEO or leader during the turnaround or start-up of businesses in Australia, England and Asia and worked with clients and partners ranging from Australian-based entrepreneurs, families and business owners to foreign governments, a Royal Family and multinational service organisations such as Deloitte, KPMG and Andersen.

You can learn more about Stuart’s training programs for the SME Association of Australia at — www.smeaustralia.asn.au/ or connect with him directly at starnext.com.au/

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LEADERSHIP

Action with Lisa Rubinstein explains why your people don’t take action and what you can do about it.

“Getting anyone to take the right action at the appropriate time is one of the greatest leadership challenges.”

W

About the author As the CEO of the Institute For Human Potential, Lisa Rubinstein brings the insight and wisdom of almost two decade of transforming the lives and careers of leading executives in Australia and internationally as an executive coach and trainer. She has invested years of learning and research into the source of leadership excellence, the findings of which are outlined in her book, True Leadership: The Source of Success.

Lisa will be running her first and only public workshop 15 and 16 March in Sydney, based on the findings from her research. For more information, go to www.thehpinstitute.com.

Follow Lisa’s blog at lisarubinstein.net or on twitter @lisa_rubinstein.

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MAR 2012

hether yours is a highly complex organisation involving long-term strategic planning across many countries or a simple task involving one person, the success of that venture comes down to two factors: • Taking action • With integrity It may sound simple, but in reality it’s far from easy. Getting anyone (you included) to take the right action at the appropriate time is one of the greatest leadership challenges.

Even when they know what needs to be done, people often do not take the right actions even when faced with obvious negative consequences.

In order to fully understand the source of what drives company performance, you need to look at the underlying issues behind the decisions that lead to action.

To help uncover what is at the source of people’s behaviours and demystify issues of performance associated with that, I came up with the Integrity Action Performance Matrix.

business that can threaten its future. Deliver a report late or not at all and your colleagues, clients or staff may start to question your abilities and regard you as having little or no potential or relevance to their business.

At this point some will begin to question their own abilities or regard their situation as hopeless and intractable. Go down this track far enough and all sense of possibility can be lost.

This is the quadrant of learned helplessness. It’s where people have thoughts that include: • I don’t know what to do; • I don’t have the time; • It’s too hard; • What I do isn’t important/doesn’t matter.

The problem is that because many of these thoughts reside in our unconscious, people often fail to identify them as the source of their lack of performance. Instead, they believe that either they are inadequate for their job or they are in the wrong company with the wrong people.

Poor Performance

Leadership matters

At the lower left of the matrix lies poor performance. That’s where people take no action and have no integrity. I define integrity as people doing what they say they will do, or doing what needs to be done to ensure success.

For example, Bill promises to deliver a report by Monday and doesn’t. If this happens often enough it causes a breakdown. For example: if a sales person continually fails to call key customers, the company may lose a significant amount of

This is where a leader can step in and remedy the situation.

As the leader, you communications are critical as they leave your people with a sense of how you authentically regard them.

You need to ensure that you always interact with your people in a way that enriches them and enables them to learn, grow and move forward. It’s in your best interest as it helps to maximise your investment in your prime asset—your people. Remember, if your people are not performing, there’s often a

LEADERSHIP

reason that lies beyond the obvious. Maybe the issue lies with your own actions and conversations.

Is there something you’ve accidentally communicated that was hurtful or disrespectful? Is there something going on with them personally that’s affecting their work? Start by considering that most people want to do a good job. They want to give their best and when don’t there is likely to be a solid reason.

While poor performance actions cause problems, they can be remedied through coaching, support and encouragement from you’re their leader or their manager.

Dysfunction The lower right quadrant, dysfunction, is where companies and countries are at risk of game-ending failure. It’s where people take action with no integrity; where people lie, cheat, steal, falsify records, accounts or even company reporting; where we see bullying or backstabbing behaviours that threaten other employees.

At some stage in our lives we all fall into this quadrant. We miss deadlines, say the wrong thing, arrive at meetings late or deliver reports that we know aren’t our best effort.

For the most part, these transient events can be rectified. There may be consequences, but as long as the issue is a small one, we can usually fix it. We rewrite that report, apologise for being late or for the gaffe and move on.

If the behaviours continue they stray into the world of dysfunction or deteriorate into corruption. If left long enough, these actions

will lead to bankruptcy—not just legally, but also in the moral and cognitive sense.

People who engage in these types of behaviours often are unable to think about the long-term ramifications of their actions.

They are caught up in the moment and may even get a thrill from breaking the rules or the law. They will justify their actions with thoughts including: • It’s not that big a deal; • No one will be hurt; • No one will notice; • It’s just this once; • I/they deserve it.

All of which, in their world, serve to mitigate the impact of their actions. They are likely to distance themselves from the damage by laying the blame on someone else, as they are unable or unwilling to take responsibility for their actions.

It is almost impossible to interrupt the patterns of thinking at the source of these actions without a catastrophic, life-changing event. Sometimes that might not even be enough.

Often this type of person is not open to coaching or other interventions. If you identify someone with these tendencies, you need to watch them closely and probably will need to terminate them, as their actions can put your company at risk.

It’s easier to avoid these behaviours by starting your venture, team or business operating with integrity ( top left quadrant).

If you start with a high degree of integrity during the planning phase, you are more likely to succeed. When formulating any business or strategy, ensure that you

think through all the different issues and opportunities and allow for the unforeseen.

Then recognise that as you move forward, integrity will drop. People will be late for meetings, miss deadlines, forget, have competing priorities and so forth.

The way forward is to recognise and take responsibility for any missteps and rectify what you can.

Peak Performance The top right quadrant, taking action with integrity is where we all need to operate to be successful.

If you or your organisation is looking to evolve to the next level or recover from a breakdown, you need to take massive action with the highest integrity to fix those issues that have caused you to stray too far below the line.

Ideally, you would operate in a state of peak performance where you have the right mix of people in the most suitable roles— where what people are doing is congruent, or the right fit for their values, talents and interests. Then they are able to give their best. Remember that as a leader you have a profound impact on your people. You need to authentically care about their growth and learning.

And finally…

Be mindful of your own integrity—recognise your people will follow the behaviours you model. If you consistently take actions with integrity you will generate a culture of success—where you, your people and your company will prosper.

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LEADERSHIP

Do you micromanager or break promises? If so, Julie Parkinson says you’re indulging in a toxic workplace behaviour that every business should banish.

I

n childhood we are taught about unacceptable behaviour by our parents.

The same lessons apply in the workplace.

The culture of a workplace sets the tone for employees and can greatly impact on the productivity and engagement of staff.

In order to create a productive and healthy culture, workplaces need to be clear about what they will and will not accept from their employees.

Here are the top ten behaviours, in no particular order, which we believe are unacceptable in workplaces.

1. Being distracted When having a conversation with someone in the workplace, give them your full attention.Even if the conversation isn’t high on your priority list at that moment, turn away from your screen, don’t look at your phone and look at them while they speak to you.

If you really don’t have the time right then to have the conversation, tell them so nicely, and let them know a time that would be more suitable to you.

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MAR 2012

2. Micromanaging Allow employees to do the job you are paying them to do. Give them the respect and trust they deserve. Having said that, as a manager or team leader it is still your job to ensure that employees have the skills and capabilities to be able to do the job at hand. Hire well, delegate and develop people appropriately and be mutually clear on what needs to be done, and by when.

Check in occasionally, but otherwise let your employees do their jobs.

3. Breaking promises If you say you are going to do something, do it. If circumstances change then let the other person, or people, know in a timely way. You don’t want to be the person in the office that no one feels they can rely on.

4. Don’t take things personally Whether it’s being left out of a meeting, or even just a lunch with colleagues, don’t take anything personally or make assumptions about a situation.

Think about why you have not been included. Perhaps your colleagues going to

lunch knew how busy you were and didn’t want to disturb you, or the meeting had nothing to do with what you were working on at that time. Recognise that it isn’t all about you. Whatever the situation is, it might not be a slight, but rather just not relevant to you or your current situation.

5. Not taking responsibility for your actions Are you someone who always has your excuses or denials ready?

Try taking ownership and accountability for your actions. For example, if you are consistently late for work don’t continue to blame bad traffic.

What could you do to rectify the situation?

Perhaps you need to wake up earlier, or catch an earlier bus. Each employee taking responsibility for their own actions and decisions helps to create a better and happier working environment for all.

6. Gossiping Avoid the urge to share secrets with others. By gossiping you risk destroying relationships and trust with colleagues

LEADERSHIP

“Whether it’s being left out of a meeting, or even just a lunch with colleagues, don’t take anything personally or make assumptions about a situation.”

around you. No matter how interesting the piece of information is, if someone has asked you to keep something to yourself, do it. The only exception to this rule is if it is something illegal, or if someone may be harmed as a result.

7. Having a conversation with the wrong person If someone is doing something to annoy you, or doing something wrong, don’t start by telling someone else about it. Direct your comments towards the person who is doing something wrong. Providing constructive feedback is about building a trusting relationship and this won’t happen if you can’t have an open, honest and respectful conversation about what is bothering you.

8. Living in a bubble of your own importance Most of us have to share a workspace with other people for about eight hours a day, five days a week. Not everyone is going to enjoy everyone else’s habits. Make sure to look outside of your bubble and take notice of how your behaviour may be affecting others. Do you talk too loudly? Does your

mobile have a loud or annoying ring tone?

Ask for feedback from those around you to find out if some of your behaviours may be affecting others and if so, rectify the situation.

If the situation is reversed and someone’s behaviour is upsetting you, let them know.

But do it in a way that makes it clear that it is not about them personally, but about the behaviour.

9. Invading others space Respect other people’s belongings and their space. If you need to borrow something, ask first, or if the person isn’t around but you believe they would be comfortable with you using the item, make sure to put it back in its proper place and inform the person you used the item. This shows your respect for your colleagues.

10. Stealing the limelight In other words, give credit where credit is due. If someone has a great idea, don’t steal their glory. If having a conversation with someone else about the idea, ensure you mention who came up with it. This builds trust and open communication, the other

person will know they can trust you and can openly share their ideas with you.

A leader can promote a constructive culture through avoiding all of these “unacceptable” behaviours and modelling desirable behaviours, encouraging open dialogue and feedback conversations.

Workplaces with a positive culture have more engaged staff and ultimately will be more profitable due to increases in productivity and customer or client satisfaction.

AbouT THE AutHOR The Institute of Executive Coaching The Institute of Executive Coaching (IEC) works with organisations to provide innovative leadership and coaching support to improve the performance of individuals, teams and organisations. Since 1999 the IEC has trained more than 2,500 coaches and become known as one of the region’s most respected executive coaching, coach training and leadership development organisations. All of the IEC’s services are designed on the key principles of the IEC’s mission to empower people to fulfil their potential and develop the leaders of tomorrow. www.iecoaching.com

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FLEET MANAGEMENT

Accidental lessons in fleet

management

Bruce Jeffreys is a founder of car share company GoGet, and explains the steep fleet management learning curve he experienced at the successful company.

G

oGet didn’t begin life as a fleet management company.

We began with three cars shared between neighbours in the Sydney suburb of Newtown and the conviction that technology meant that there could be a more efficient way to use vehicles.

GoGet’s system basically works like this: cars can be booked for as little as one hour over the Internet. The cars are parked either on the street in designated spaces that we call “pods” or in private parking spots assigned to car share (for example, in a strata building or an underground parking garage). Drivers gain access to these vehicles via a swipe card and then use the car as much as they need (an hour to buy groceries, for instance, or two hours to drive the kids to a violin lesson). Afterwards, the driver returns the vehicle to the same spot, locks it up and walks away.

Our telematics software track vehicle use, tie all of this information into our web-based system and this usage can then be charged directly to the driver, who pays per hour of use and distance driven.

Among other things, drivers never have to pay for fuel, worry about vehicle maintenance or any of the other attendant costs of owning a car like registration or insurance.

The lesson begins In 2005, the lessons in fleet management began for us when we got our first business member, a consultancy firm based in Surry Hills. By this point, GoGet already had a strong presence on Australia’s streets and our member support systems, both technical and human, were field-tested and resilient.

So when it came to our first foray into fleet management, we knew that we already had a system in place that could be used by businesses with few, if any, modifications. What we did not know was whether businesses would fit with GoGet. In fact, we had serious doubts.

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MAR 2012

AUSTRALIAN FRANCHISE OPPORTUNITIES EXCHANGE

Australia’s longest running and best site for franchise opportunities www.franchisedirectory.com.au Established in 1996, the Australian Franchise Opportunity Exchange lists hundred of Australian Franchise Opportunities. Opportunities exist in the areas including: • food • accommodation • building • home-based businesses • business services • domestic services • retail • childcare • takeaway food • leisure • automotive • computers You name it, there is a franchise opportunity to suit you.

So click on www.franchisedirectory.com.au and join the 500-plus people a day (170,000) per year) who visit Australia’s longest running and most respected franchise site. Youll be able to comfortable browse the opportunities and compare costs and locations.

The Australian Franchise Opportunity Exchange is supported by many of Australia’s largest franchise chains. So why not seize the opportunity to join the 60,000-plus people who are franchise owners in Australia, and take advantage of the fastest growing trend ion the small business field.

FLEET MANAGEMENT

“Fleet management requires the constant management of a complex set of variables in the most efficient way possible.”

How would business users treat the vehicles, compared to our consumer members? At the time, my sense was that they would be harder on the cars. As it turned out, I was wrong. The consultancy had a fleet of exactly two Toyota Corollas. It sold one and put a GoGet car in the parking spot. If anything, the Surry Hills consultancy treated our car even better than our consumer members. Not only that, our car was treated better than the car the company actually owned.

We had gained our first critical insight about fleet management.

From our perspective, we were simply signing on the business as just another one of our members, but from the perspective of the employees of that business, there was now a third-party acting as manager and umpire of the fleet. For example, our system means that if a member doesn’t leave the car relatively clean, eventually, after doing this say three or four times and receiving a few warnings, we will actually pull their membership.

Apply that fact to a corporate fleet management situation and you build in a strong incentive to keep the vehicle clean and in good working order. For our first business member, it was the Toyota Corolla they owned themselves that had the apple cores left in the ashtray.

But it was not just better vehicle treatment. A huge problem with corporate fleet management is scheduling. If one employee is late in returning the car, another employee who has booked the car for a particular time is disadvantaged. If that tardy employee happens to be the boss, often the other employee has no recourse, not even a whimper of complaint.

That’s not a recipe for efficient fleet management because it is steeped in the dysfunction of company culture. As an off-site umpire, GoGet’s booking system stood between these two employees. It was no longer a question of being able to pull rank or fudge the rules because there was no rank and the rules were known well in advance, consistent and applied equally. Habitual late returners will lose their membership too. And the fleet management nightmare of tracking down employees who shirk traffic tickets and cost companies a hefty RTA penalty is virtually impossible. Swipe card technology and individual driver traceability prevents it.

I’m not advocating that everything in life be run in lock step. But fleet management is by definition about reducing the risks connected with vehicle investment, lowering transportation costs while improving things like efficiency and productivity.

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We were realising that not only was GoGet an excellent fit for business fleet management, it had always been a fleet manager. At its core, fleet management requires the constant management of a complex set of variables in the most efficient way possible. Yet the majority of conventional fleet managers, whether insourced or outsourced, were often actually not modelled around sharing at all since they worked on the one car for one driver model.

After the Surry Hills consultancy experience, we looked at business fleet management as another way that the spirit of car share, both communitarian and environmental, could grow in Australia. What we soon recognised was the growth of our standard membership pool and our business users were not separate paths, each could support the other.

Spreading out If a business wanted to use car share, it helped if the membership levels in its vicinity were robust and we had a good vehicle footprint.

But what happened if a business was in an area without one? We faced that situation when Optus approached us.

Optus had recently re-located its campus to a business park and was interested in providing its staff with the benefits of car share. But the campus was located in an area where GoGet did not have vehicles because of its low-density population. What Optus could offer were parking spots and the commitment that these cars would be used.

In Optus’ case, we also arranged for a pre-paid driving credit, a sort of car subsidy model. In a sense, we were selling Optus an Optus product, a pre-paid service, but in the form of a car, not a phone.

That experience and those that have followed taught us that corporate culture needs to make the shift for car share to work for fleet management. Rather than locking up those fleet cars, car share means they can be used by the wider community so businesses can get fleet benefits while also giving something back. It’s easy to check off the system-based advantages of car share for fleet management.

What’s difficult is shifting the mentality of a resistant business culture.

Optus made that shift; other businesses are still contemplating it.

Bruce Jeffreys is a co-founder of GoGet, Australia’s first and largest professional car sharing service. Its slogan is “Like owning a car, only better!” www.goget.com.au

Share your culture and food at work!

Regisntower!

EB SIT E FO R VI SI T TH E W ILS M OR E DE TA

Food brings people together even in the smallest workplace.

A Taste of Harmony is a fun and free way to discover more about the cultural diversity in your workplace. Simply register online, set a date and ask workmates to bring a dish to share.

TASTEOFHARMONY.ORG.AU

A TASTE OF HARMONY IS PROUDLY SUPPORTED BY

FLEET MANAGEMENT

5 hidden

Hidden cost one

logistics costs

Delivery Inefficiencies: Inefficient delivery systems result in higher fuel costs, higher maintenance costs, wasted time and therefore money. They can also negatively impact service levels. Yet the tools exist today for any SME to efficiently optimise and track their delivery systems.

Walter Scremin explains five transport costs that can sneak up on your business and how you can put the brakes on before they spin you out of control.

$

eamless transport and logistics are often the backbone—or at least the nervous system—of many small to medium enterprises. Yet many businesses struggle to pin down the real costs of running a logistics system and in many cases do not accurately know what it costs to run a single vehicle.

In the case of a single vehicle, the costs may seem relatively straightforward on the surface.

Hidden cost two

Wasted management time: Things go wrong in logistics, guaranteed. Too many organisations have management waste valuable time fighting logis tical spot-fires when they could be working on other more profitable core business issues. The cost of wasted time is difficult to measure but can be exponential, so it is impo rtant to have systems for efficiently dealing with disruption s.

ree to Hidden cost y:th istical issue is The hardest log

Hidden cost four

pacit ed at Over/under ca d drivers you ne any vehicles an m w ho les tly hic ac ve know ex with too few under capacity, ing in nn ra st Ru ts e. pu tim any st because it mes a hidden co poor to e du k ris at for need, beco clients siveness, places ions such on your respon band-aid solut ly st co to ds lea n te of d ving too an service er capacity, ha ing couriers. Ov hir rily ra greatest po e m th as te bad – one of can be equally le. id many vehicles, hicles sit ess is having ve costs to a busin

Anything non-fixed: This can be difficult to pin down, and a good reason why many SMEs choose to outsource their logistics requirements. Because when you run your own fleet, you are at the mercy of fluctuations in the price of fuel, along with othe r non-fixed items including maintenance. Vehicle break-downs or accidents will occur without warn ing, interest on loans will fluctuate, wage increases and the ongoing issues relative to the costs associated with personnel injuries or accidents such as Workcover and insurance – your premiums are only fixed until you have an accident or injury, which will lead to increases .

cost to buy or lease vehicle + driver + admin + registration + insurance + servicing + fuel If only it was so simple in reality. Even taking into account that fairly long list of expenses, there lurk hidden costs that only the most organized can keep a track of.

For example, on those days where you have surplus vehicles and a car, van or tray sits idle in the parking lot, what is the cost to your business?

Reigning in hidden costs will go a long way to having a successful year. Here are the five most common hidden costs of transport and logistics that business must consider for 2012: Walter Scremin is General Manager of OnTime Group www.ontimegroup.com.au

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MAR 2012

Hidden cost five

y, professional and loyal drivers can Driver absenteeism and turnover: Getting qualit one of the greatest disruptions and be tough. Replacing drivers when absent is s poor service, disgruntled staff costs to any business. Absenteeism often mean yed just in case they’re required and the cost of additional resources being emplo it costs in term of advertising, leaves driver a if people are absent. And every time ing familiar with the business and interviewing, time spent training and becom delivery routes.

There is no easy answer to reigning in all of these costs— outsourcing to specialists is one option. But identifying these hidden costs is the first positive step toward more efficient logistics.

SPONSORED CONTENT

Australasian Fleet Management Association’s 2012 National Conference With growing pressure on businesses to do more with less it’s important to empower yourself with the tools and information to manage your vehicles efficiently and effectively.

I

n the last year there have been changes to legislation covering Chain of Responsibility, Occupational Health and Safety and FBT, as well as the introduction of new accounting standards that impact how you factor your vehicles in your books.

There is also a push for safer vehicles, safer driving and lower vehicle emissions.

Now more than ever, managers in SMEs need access to tools and knowledge and there is no better place to learn about the management of your vehicles than the Australasian Fleet Management Association’s 2012 National Conference and Exhibition.

Over two days, the Conference offers sessions and workshops catering for every type of fleet, whether you have two cars or thousands. The presenters are fleet industry experts and professionals with the experience to answer your questions.

Between sessions, catered meal breaks take place in the exhibition area offering you the opportunity to meet suppliers and network with other vehicle managers in a

relaxed atmosphere. The keynote session on Tuesday 20 March will give an international and local context for the automotive industry.

This information could help you decide when to buy your next vehicle and what you might expect to pay when you do.

The concurrent sessions throughout the rest of the day, including some of specific interest to SME managers, offer you the freedom to design your own Conference experience.

Whether it’s a huge fleet or just a couple of vehicles, every manager can learn how to apply an asset management framework to accurately measure asset effectiveness and make future purchasing decisions.

There will be sessions on changes to Chain of Responsibility as well as other relevant legislative updates.

There’s also the opportunity to learn from the best about what to do with your vehicles towards the end of their life and how to get the most out of the remarketing process.

The second day offers a series of six

workshops over longer sessions and in smaller rooms to give you the chance to apply what you’re learning to your own, specific situation. They include Scenario Planning, Fleet Fundamentals, Asset Management, Benchmarking and the new Safety Audit Self-Assessment tool.

Delegates are encouraged to bring along their own data and policies in each area for in-depth discussion and participation.

AfMA is offering an exclusive extension of its early-bird pricing for readers of My Business Magazine until 1 March.

Members of the Association also enjoy a Member’s discount and, if interstate, a further discount to help out with travel expenses.

Businesses with less than 250 vehicles can make the most of the Conference without breaking the bank—you can enjoy a full year of Membership benefits and attend both days of the conference for less than a non-member registration.

For more information, contact AfMA on +61 3 9866 6056 or go to www.afma.net.au.

KEYNOTE PRESENTATION

Session sponsored by Honda Australia John Conomos AO, one of Australia’s most successful and charismatic automotive industry leaders, will be joined by international fleet expert Stewart Whyte from the UK, economist Janu Chan from the St George Banking Group and Ken Thompson from AfMA for an overview of the state of play of the automotive industry, the fleet industry and the impact of current economic challenges.

DRIVING EMISSIONS REDUCTIONS: Session sponsored by Caltex Australia BALANCING THE PEOPLE, THE PLANET AND THE BUSINESS CASE

The debate over emissions has shifted and in this session, representatives from across the industry will discuss the realities of reducing emissions while taking public health, environmental concerns and economic realities into consideration.

BENCHMARKING YOUR WAY TO COST SAVINGS

Fleet can often be the third highest outgoing for the organisation but it is an expense that can be managed. This workshop is designed to show fleet operators how they can create cost savings by measuring effectively the fleet’s performance, putting it in context with similar fleets and best practice and giving them the tools to measure the gaps and develop a strategy for the future.

47

CASE STUDY

Preparing a Table of Plenty Story by Andy Girvan

Kate Weiss’ business Table of Plenty has an unusual aim—providing financial security for a daughter who will need lifelong care.

K

ate Weiss became an entrepreneur to build wealth, but not only for herself.

Instead, Weiss hopes to fund lifelong care for her daughter.

Weiss’ daughter, Amy, was born with a rare genetic disorder called Rubinstein-Taybi Syndrome. “It’s a very strange experience to have this kind of unknown in front of you, and it was very unknown for the first five years when we didn’t have a diagnosis” she says.

The demands of caring for a daughter with special needs forced Weiss to leave her job and rethink her plans for the future.

“I really had quite a few months where I was doing some soul-searching and trying to find out what I wanted to do,” Weiss says.

That thought process led her to decide that she wanted flexible work, so she had enough time to help Amy. Wealth creation was also important, to provide for Amy”s future.

“Amy’s going to need to be looked after for the rest of her life and we just felt that business was probably the best way to build up capital” Weiss says.

A love of Middle Eastern food made spices a natural fit for the new business, but Weiss happily admits she had next to no experience.

“We were so green when we first went into Coles and Woolworths. It really was a matter of having the courage to pick up the 48

MAR 2012

phone and say, this is what we’ve got and this is why we think we’ve got a place on your shelves” Weiss recalls. Five years on, the Table of Plenty range of foods and spices is now stocked in over 1000 outlets across Australia and is exported to five nations.

Taking it to the next level Before the company achieved this level of success, Weiss secured delis and wineries as resellers of her products. But she knew that wouldn’t be enough.

“I suppose after a year or so [of selling a small range of spices to delis and wineries] it was clear it was going to be too niche for what I wanted to do,” she says. “My husband came on board in 2006 and just before that I sat down and said, look we need to take this to the next level.”

That meant cold calling the big supermarkets.

“We just literally went in with our product and said we think we bring innovation, we think we bring an authenticity and an integrity.”

After finding the supermarkets to be very receptive to stocking their product, Weiss was able to build on her vision for the Table of Plenty brand to expand its product range adding breakfast cereals, healthy snacks and a range of products aimed at children.

“We’ve learnt a hell of a lot and fallen over a

few times but gotten up as well. It’s been a very steep learning curve.”

Finding balance One of the hardest lessons to learn was how to find balance.

“When you need to be businesswoman and mum at the same time, it’s not a good mix,” Weiss says. “I’m always very clear there are certain things I won’t compromise.

For instance, my son had a function at his kindergarten that came up and I had to fly up to Sydney for a meeting with Woolworths. I rang them and said “I’m sorry to do this to you but it’s my meeting with you or a four year old’s heart.” They were very understanding and in the end it”s just changing the time of a meeting, it’s not the end of the world.”

Weiss’ daughter Amy can be sick for prolonged periods and Weiss has more demands on her time than the average working mum. The flexibility of being her own boss has enabled her to spend time at her home office so she can actively care for her daughter.

Giving back Despite her amazingly heavy workload, Weiss also finds ways to give back to the community. Amy’s condition means Weiss has seen the benefit charities can provide

CASE STUDY

“…we think we bring innovation, we think we bring an authenticity and an integrity.”

to people and as such had a desire for her business to give something back to the community. One of the charities Table of Plenty supports is SCOPE, an organisation that finds employment for people with disabilities. SCOPE are involved with co-packing their products and they’re also supported through donation and other means such as food hampers. Another charity they support is Jewish Care which is a charity Weiss’ daughter Amy personally benefits from. The organisation runs a respite house in Melbourne that Amy goes to and Table of Plenty are active in supporting them financially as well as with promotion and fundraising. Giving back to the community was a key motivation in

establishing Table of Plenty and Weiss sees the importance of continuing to provide support to charitable organisations. “I’m about to meet with them [SCOPE & Jewish Care] to discuss what we’re doing over the next year so we can rely on ourselves a bit more to continue to support them.”

While continuing to develop and expand their range Weiss believes increasing their international presence is a key area in business growth. “I think as an Australian company it’s a very wise thing to do.

Twenty million people may sound like a lot but in terms of world population it’s not very much. Export is definitely a key area in getting more economies of scale and volume of products out there” she says.

While already exporting to countries such as Dubai, Singapore, Thailand and Brunei, exports are a growing focus for the Table of Plenty brand.

So what advice does Weiss have for other mums who might have a vision for their own business?

“Make sure you don’t stop doing those things that keep you recharged and energised” she says.

“I’d give them the hard cold shower talk but I think the other thing I would say is there is a lot of fulfilment and a sense of achievement to be had by running your own business. You just need to have the courage and confidence in your own abilities to actually take that forward.”

ShenYun2012.org

49

TECHNOLOGY

Footy fight shows

clouds can kill Cloud computing has been sold to small businesses as a wonderful opportunity to access worldclass technology at tiny prices. But a recent case involving online replays of football games shows the cloud can also kill.

Story by Simon Sharwood

50

MAR 2012

I

n early February the Federal Court handed Australian businesses a lesson: cloud computing can be a devastating disruptor that you need to understand deeply before someone uses it to kill your business.

The lesson came in the Court’s decision that Optus’ TV Now service can continue to operate—for now.

TV Now is like a video recorder in the cloud. If you want to record a show, you program the service to capture it. You can then watch it at your leisure, up to 30 days later, on your mobile phone.

The court case centred on whether the service is legal for football games, an important issue to the NRL and AFL because both have sold their online and mobile rights to Telstra for rather impressive sums. TV Now undercuts those deals by making it possible for anyone to record a footy match and then watch it on their mobile phone.

The Federal Court ruling said that recording programs for personal use has been legal for ages and that TV Now

“…is substantively no different from a VCR or DVR (digital video recorder).”

The judgement also interprets copyright laws, saying: “It is unlikely that the Parliament intended to confine … the technology or other means available to be used by a person who wished to make a film solely for private or domestic use and subject to the other conditions … The Parliament intended that an individual should be able to time-shift by making a copy of a broadcast that he or she could watch or listen to at a more convenient time.”

Optus CEO Paul O’Sullivan, in a statement issued to the media, said the decision was a continuation of the wellestablished right to record shows for personal use.

“The decision continues to allow millions of Australians to record and play back free to air TV at their convenience,” he said, “just as they have done since the VCR arrived in Australia and continue to do so today via emerging digital services like TiVo, Play TV and Foxtel IQ.”

TECHNOLOGY

“All of the technology required to transform industries through software finally works and can be widely delivered at global scale.”

Software eats the world The impact of the decision on football codes is so profound that, at the time of writing, the Federal Government had started making noises about amendments to copyright laws.

Whether or not the law changes, every business needs to think about what this means for its model and strategy. That’s because, as articulated by Marc Andreessen, “software is eating the world.”

Andreessen should know. He was the programmer of the first graphical Web Browser and founded Netscape Communications, the first internet software company. It’s no understatement to say that Andreessen bears very considerable personal responsibility for the massive public and business adoption of the Internet.

These days Andreessen is a venture capitalist with an impressive track record of backing online winners like Facebook, Twitter and Groupon.

Andreessen’s articulated his software eats the world theory in the Wall Street Journal, where he asserted “all of the technology required to transform industries through software finally works and can be widely delivered at global scale.” His story (see http://on.wsj.com/o6yIeE) explains how the music business was turned into a software business by Apple’s iTunes, how advertising was turned into a software business by Google ads and how photography went from being all about chemicals and films to being all about software and sites like Flickr.com.

He also points out that the fastestgrowing entertainment companies are games

developers and says LinkedIn—which of course is all software—is the fastestgrowing recruitment company.

Another of his observations is that software-based businesses are very, very cheap to run. A decade ago, he says “the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.”

Costs are obviously low enough that a company like Optus, with millions of subscribers, can set up a service capable of recording TV shows and storing them in a data centre for later download.

By doing so with TV Now, Optus has shown Australian businesses that even something most of us consider dependent on an appliance that sits in your home— recording TV shows—can now be re-cast as software and a cloud service.

Crying wolf An appeal has already been lodged about last month’s decision, which is fair enough.

Even if that appeal is successful, Telstra and the football codes are doomed to fail in the long term, because once software hits an industry, consumers change behaviour.

Threatened industries instinctively seek to quash disruptive innovation by running for legal cover, but that’s futile. To understand why, consider how badly Gerry Harvey fared when he called for better enforcement of GST on imported internet purchases.

Remember, too, when record companies

lectured us all about the evils of digital music and how it enabled piracy. All those exhortations probably did not stop a single iPod flying off the shelf and certainly didn’t help record stores to keep their doors open.

When you look at the music or retail industries today, the innovators are winning.

Those who filed lawsuits aren’t doing as well.

The TV Now case is therefore a massive wake up call for Australian business. For several years now, business and especially small business has been told that cloud computing means lower costs, greater flexibility and unlimited possibilities.

Now we have strong local evidence to back Andreessen’s view that software is eating everything and that software in the cloud can transform industries. That means it is time to recognise that the cloud can mean massive and damaging disruption, because if your business can be turned into software someone will eventually figure out how to do it and eat your lunch almost before you notice it.

So by all means buy some cloud services for your business. Enjoy the lower costs.

Enjoy mobile access to applications and the security that comes with your data residing in a world-class data centre. Enjoy elasticity, the ability to add or remove users whenever you want to.

But don’t let those positive aspect of cloud computing stop you from thinking very deeply and very strategically about just what the cloud really means for your business ... or how you can use the cloud and software to take someone else’s!

51

TECHNOLOGY

GADGETS My Business assesses

HTC’s Velocity 4G

HTC’s new Velocity 4G is a wonderful smartphone. A slick implementation of the Android operating system, powerful processor and access to the speedy Telstra 4G network (which is about five times faster than 3G) all add up to an impressive package that will be a very powerful contender for your next handset.

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verything you expect in a high-end phone is built in: there’s a lovely big and bright touch screen, a grid of icons to activate plentiful apps and a very decent camera.

That’s great for consumers and for simple business tasks like email. But it’s also off the pace in some important respects, because clever thinkers are re-imagining smartphones as a computing device you’ll want to use instead of, or alongside, a computer.

Smartphones that plug into monitors and keyboards and have the grunt to connect to your office are on these thinkers’ agenda. The idea is to take advantage of the ubiquity of smartphones to replace or augment laptop computers. Some have even built walled-off versions of your office PC that can run inside a smartphone. The Velocity 4G gets us a little down that road, thanks largely to its ability to hook

up to monitors. Its use of a 4G network also helps, as the extra speed makes it possible to create a better user experience for the bandwidth-intensive tasks a PC performs.

Yet because it doesn’t yet try to adopt those new ideas about the role of a smartphone, the Velocity 4G feels a little off the pace.

If you’re off contract and want a state of the art phone that is faster than anything you’ve ever experienced, there’s little reason not to consider the Velocity 4G. If you want a better way to work that truly takes advantage of the speed of a fourth generation network, wait until HTC or another manufacturer starts to think how to apply the latest thinking about mobility and the post-PC world to the smartphone. www.htc.com/au/smartphones/htc-velocity-4g/

rise to the challenge

Join other top business leaders and directly support Australia’s 105,000 homeless people

2152june 2012 MAR 2012

Register or donate at: www.ceosleepout.org.au

Unintended chronometer

Sneaky security

Surveillance cameras have come down in price a lot over the years, so smaller businesses can often afford pretty sophisticated equipment. Panasonic’s WV-SW155M shows off the affordability trend nicely, offering very high resolution, wide angle image capture and shock resistance.

The camera is designed to be mounted on a ceiling, can cope with low light, offers digital zoom and is even equipped with various connections that allow it to be installed in vehicles.

Panasonic hopes you buy a specialised video recorder to capture the cameras’ output, but you can also record to an SD card in case of emergencies.

Prices aren’t fixed, because you’ll need an installer to put these in and they’ll bundle the cameras in their wider quote. www.panasonic.com.au

Tame your email

If you suffer from email overload or find your inbox is full of items from mailing lists you can’t quite remember having subscribed to, unroll.me could be for you.

This new service, in invitation-only beta at the time of writing, analyses your inbox and your email reading patterns. After a while it produces recommendations about mailing lists from which should unsubscribe and suggests others you will probably find more fulfilling The service is free. www.unroll.me

Famed science fiction author William Gibson once wrote that “the street finds its own uses for things,” a phrase which perfectly describes the Ozaki iPod slapwatch.

This $29.95 accessory offers a bracket to hold an iPod Nano, as that device is about the shape and size of many wristwatches.

The idea isn’t entirely novel – a few others have made similar products.

They caught on and Apple even added a few faux watch faces to the Nano, a lovely example of consumer behaviour and secondary innovation at work. www.platinumonline.com.au

Cloudy scanner

Connected cufflinks Über-geeks have been postulating a future of wearable computers for a while now, and it seems their techno-fantasies have become reality in the form of these WiFi cufflinks. The silver (yes—real silver!) cufflinks conceal a two gigabyte memory key and a device that when plugged into your laptop creates a WiFi hotspot. We think the idea is that these become your cufflinks of choice when travelling, as the memory means you’ll always have a USB key in an emergency while the hotspot lets you share a single laptop’s internet connection among several machines.

The cufflinks are a bit pricey at $US249 a pair, but if you can do without the WiFi there’s also memory-only alternatives at $US99.

Don’t forget that you’ll also need shirts with French cuffs. Then all you have to do is master putting on cufflinks without someone else’s help. Even the smartest geeks struggle to do that. www.brookstone.com/polished-silveroval-wifi-and-2gb-usb-cufflinks

3 steps. 10 minutes.

Better backup.

Epson’s WorkForce DS-30 is the cutest scanner we’ve seen in a while.

The $199.95 device weighs just 325 grams needs only a USB connection to your PC or laptop to get to work.

Those features make it very portable.

The DS-30 can also scan documents directly to the cloud, bypassing a PC and instead uploading to Google Docs, Evernote and SharePoint.

The gadget also performs everyday scanning tricks like capturing documents at up to 600 dots per inch and can cope with documents as small as a business card all the way up to A4 paper. You also get the usual suite of scanning and optical character recognition software that has been a standard inclusion with scanners for years. www.epson.com.au/products/ scanner/workforce_ds-30.asp

Find out more at

betterbackupforall.com for small business

53

EXPERTS Robyn Anderson

“A good boss listens to an employee’s compliments and the not-so-good feedback too.”

Ten talent retention tips

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mployee retention does not happen by accident. It is the result of a carefully planned approach that inspires, challenges and most of all values its staff. Does this sound like your business? If not, don’t despair, this top ten will have you well on the way.

1. Inclusive management People leave managers and supervisors more often than they leave companies or jobs. These days employees tend to expect a collaborative and inclusive management style. Autocratic managers often make employees feel as if they are being treated like children or their opinions and skills are not valued. This can be particularly true of Gen Y workers. It is also important to create a work culture in which people can contribute ideas constructively.

2. Don’t oversell a job Don’t oversell a role during the recruitment process.

This can lead to disappointment for the new appointee as they find the job they landed does not match their expectations. A disappointed employee rarely stays.

3. Carry out inductions Take time to meet with new employees to learn about their talents, abilities and skills. Thereafter, meet with each employee periodically. It’ll help you keep your finger on the pulse of your organisation and it’s a critical tool to help employees feel welcomed, acknowledged and loyal.

Robyn Anderson is a fellow of Australian Human Resources Institute and the Managing Director of HR Navigation Australia, an HR and Workplace Relations Consultancy specialising in providing Outsourced HR Manager Services to Small and Medium Businesses. To contact HR Navigation call 1300 669 747 or visit www.hrnavigation.com.au 54

MAR 2012

4. Utilise employee skills I once knew a sales rep who had several years of graphic design and logo development experience and repeatedly offered to help his business when it was rebranding. His offer was ignored and he cited this as one of the reasons why he quit his job.

The business not only lost a good employee, but one that could have saved it money or served as a project manager for the rebranding project.

5. The right tools and training Employees must have the tools, time and training necessary to do their jobs well. This is often an overlooked area in businesses that have financial constraints, but if your employees can’t do their

work due to a lack of training, insufficient time or inappropriate tools then your productivity and efficiency will decline and your employees may move to a different employer.

6. Recognise good work Your staff members must feel rewarded, recognised and appreciated. Don’t assume that employees know you appreciate their hard work—tell them! Rewards don’t have to be expensive. Even a thank you and public acknowledgement can go a long way.

7. Fair pay for all It is crucial that you run your business in a fair manner. A business that plays favourites disenfranchises many of its staff whilst keeping only a select few happy. This is particularly true with remuneration and recognition. Remember, salaries do not stay secret, so ensure that your remuneration structure is reflective of the responsibilities and market worth of each employee’s particular skills.

This is a good base to answer any queries as to why a person’s remuneration is structured as it is.

8. Listen to complaints A good boss listens to an employee’s compliments and the not-so-good feedback too. Wouldn’t you rather hear of problems rather than be the last one to know? Employees who feel they can’t raise concerns tend to go elsewhere. Even if a complaint can’t be resolved, at least the employee will feel as if they have been heard which will go some way to quietening their disquiet.

9. Look internally for promotions We have all heard the expression “if you fail to plan, you plan to fail.” This is particularly true in the business world. A good business plans for the future, not just with regard to its strategy and finances, but also its human resources.

10. Have fun at work In today’s uncertain work environment, humour isn’t an option, it’s a neccessity. Laughter may not change reality, but it can certainly help people survive it. Employees spend a lot of hours in their day at work and it is important that those hours are as enjoyable as possible.

EXPERTS Michael Griffiths

Online vs. offline

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ver since Google became big, web sites popped up everywhere and society started searching more and more online, the question has been asked, “What is the best way to market your business? Online or Offline?”

Well, unfortunately, the answer is not always as simple as you might think. Nor does one answer fit every business type or model, and that is what makes it a difficult question to answer without explanation. However, for the majority of business owners the answer is easy and one that should be implemented as soon as possible, so let’s get stuck into it.

Online still pays (and costs) Online marketing is still the hot new thing in marketing. Every day, no doubt, you receive phone calls from new search engine optimisation companies saying they can get you on the front page of Google in five minutes. And they probably can, but it will cost you to stay there for the next month and beyond.

As society becomes busier and busier and people continue to do most of their research and buying on the internet, business owners need to make it as easy as possible for people to find their product or service online, and at the time when their potential customers are looking. The key is to be found for as small an outlay as possible. To be successful online you don’t need a big budget, although if you don’t do it correctly you could end up spending hundreds per week for little or no return. But there are still ways you can save money and make your budget go further.

Using search directories and creating free listings are a great free way to develop an online presence.

Sites such as True Local, Google Places, Hot Frog, to name just a few, allow business owners to submit a free business listing, and because these sites are well ranked it allows your business to start showing up on the front page of the major search engines.

The key to being successful online is having a presence and building on it month after month with different strategies.

The smarter choice While spending $300–$400 online might generate you 50–100 leads, spending the same amount

offline with direct mail can get you into the living rooms of over 10,000 homes. Offline marketing at present is the smart marketer’s choice, the competition for your business marketing dollar is high and therefore the discounts and deals that can be made provide you with fantastic opportunities to get more bang for your buck.

This won’t always be the case as the market changes. Supply vs demand works exactly the same in marketing as it does in other parts of society, the more people want a particular type of marketing, the more you are expected to pay for it. That means business owners need to become smarter, they need to do their research or they need to have their marketing arm of their business provide them with a variety of different opportunities.

At the beginning of 2011 was a great time to use Facebook pay per click advertising, most keywords cost under a dollar. 12 months later, thanks to demand, prices have doubled.

As a business owner you have to see what type of marketing best suits your business structure. Are you a local business confined to the local residents and homes? Or do you sell across the whole State, both online and offline? Or are you a global business who has clients and sales worldwide?

The answers to these questions can, in themselves, determine the kind of marketing you should be doing and what will be most effective.

Local businesses should have about 30 percent of their marketing online and 70 percent offline, while the other two businesses should be more like 50/50 and 70/30. The wider your audience, the harder it is to be successful with offline marketing and the easier it is to target qualified prospects with online marketing.

So the answer to our age-old question is simple, advertise where you will get more bang for your buck. Ask “Where will your budget and marketing dollar get you in front of your target audience most often?”; “Where will your message be seen by the most eyes?”; and “Where will you have the greatest ability to get a high return on investment?”

There is no one way to market, nor should there be. The key is to be active and update your marketing plan regularly with new and evolving strategies to continue getting your product or service in front of as many eyes as possible.

“There is no one way to market, nor should there be.”

Michael Griffiths is the CEO and Founder of My Small Business Marketing Guru, helping small business owners generate more leads, more clients and greater profits with relationship based marketing strategies.

To grab your free ‘Black Mask’ Marketing tools visit us at: www.mysmallbusiness marketingguru.com.au 55

EXPERTS PHIL LEE

“To have an effective sales conversation the salesperson must be in an adult ego state.”

If you would like to discuss any sales or sales management issue or talk to Phil about speaking at your next Sales Conference or meeting please email him at plee@sandler.com 56

MAR 2012

“What” a powerful word!

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hen a prospective customer or client expresses interest in your product or service, your awareness and strategic use of the word “what” can play a pivotal role in developing the potential opportunity. Why is this?

It’s because asking “what” questions in early stages of the selling cycle facilitates the obtaining of the information needed to understand the nature and scope of the opportunity.

Additionally, in the latter stages of the sales conversation, “what” questions help you to determine if your product or service represents the best fit for the defined opportunity.

Let’s examine some of the important “what” questions to which you will need answers to as you work toward defining the opportunity.

• What specifically does the prospect want?

• What does the prospect think he/she needs need?

• What triggered the need or desire?

• What, exactly, is the prospect attempting to accomplish? In other words, what problem is the prospect attempting to solve or what goal is the prospect attempting to achieve?

The answers to these questions will enable you to determine if your product or service will satisfy the prospect’s perceived needs.

As the scope of the potential opportunity begins to take shape, you will need answers to additional “what” questions, such as: • What, if anything, has the prospect already attempted to do to fulfil the need or desire? What was the outcome of that attempt?

• What level of urgency has the prospect assigned to satisfying this requirement? What other priorities are there?

• What are the likely consequences if the need or desire is not fulfilled?

• What is the prospect willing and able to invest to fulfil the need?

• By what date and by what means will the prospect ultimately make a buying decision?

When you have fully defined what the prospect buyer wants and needs, and you have determined that you have an appropriate product or service to offer, there are additional “what” questions for which you will need answers before you begin working on a presentation. What are some of those questions?

• What would cause the prospect to award the sale to one company rather than another?

• What can you provide that not only specifically

addresses the prospect’s need, but also differentiates your company in a favourable manner from your competitors?

• What additional benefits will accrue to the prospect by doing business with you?

• What value does the prospect place on those additional benefits?

When you have answers to all of the “what” questions, you’ll know whether the opportunity is one you have a realistic chance of winning and what it will take to win it.

On the other side of the coin, after asking all these questions and gathering the information you might decide that you do not realistically have a high chance of doing business. That’s good too! It means that you can qualify a prospect and eliminate further time wasting that would occur if you decided to proceed blindly.

That’s not easy for many salespeople as it’s a lot easier to “chase rainbows” than it is to ask the questions I’ve provided above, because many salespeople believe that if they ask these types of qualifying questions the prospect will get upset and treat them with disdain. Their “child” is afraid of being dismissed or admonished by the prospective buyer’s “critical parent”.

To have an effective sales conversation the salesperson must be in an adult ego state so that the conversation is adult to adult rather than “child” to “parent”. This can have an enormous difference on the content discussed and the outcome of the conversation. Most sales interactions are “parent” to “child”.

Think about the last time you tried to sell to a high powered executive or someone who was very busy and didn’t have much time for salespeople?

Who was in control? Who was asking most of the questions? Was it an equal and open exchange of information or did you feel like you were under pressure and not treated as an equal?

If, like many salespeople, you felt that you were not being treated as an equal you should have quietly asserted yourself so that you were at least communicating on equal footing. This requires courage. It also requires that you see yourself on equal footing with the prospect. One of my clients, who went from being a pretty average performer to no. 1 salesperson out of 400 in his company, put it this way. “The moment that I started to believe that my time was as valuable as any CEO that I was calling on, things began to change for me”.

EXPERTS TONY GATTARI

Bridging the generation gap

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anaging a team is challenging, but when that team spans generations life can be very complicated indeed. That is because different age groups respond differently to the things that you say or do. What works well for one age group is absolutely wrong for another. To help cope with this environment, you have to start by understanding each generational group.

First of all, you have to start with respect. A baby boomer respects a person because it is automatic.

They respect people who are older than them because that is the way that they were brought up.

Now with Generation X, we have found that respect is a form of being polite. They recognise that is it not automatic, but they recognize that there is a status that must be maintained. But the Gen Y’s are completely different. They will only respect you if it is earned. If you manage baby boomers, you can lead them by edicts, memos and policies. But when you are leading Gen Y’s, you have to lead by example.

They will say to you, “If you do not do it, why should I? You have not earned my respect.”

Let us now talk about professional respect. A baby boomer respects another individual because of the length of their employment. Gen X will have respect for their peers and for their bosses based on performance. “What have you achieved? Have you really been able to turn this company around?

Then, I will respect you because I have seen the performance that you have created.”

Gen Y’s will respect people based on their qualifications – what courses they have done or what degrees they have achieved. That is a really big difference.

The other thing that we need to know is how these generations view leadership. Baby boomers view leadership as hierarchical. You have the organisational structure; you have the organisation plan; you have the right title; you have the big office and so on. Now Gen Xs style is that you need to be with them to cooperate with them.

Gen Ys idea of leadership starts with the spirit of collaboration. This can be very difficult for a Baby Boomer. They have never worked in a spirit of collaboration. Thus, to be a great leader to a Gen Y, you have to be a great coach.

The next area we need to talk about is training. A lot of organisations, because they are run by Baby

Boomers, will only say they need training if there is a problem. Gen X desires training but the Gen Ys believe that part of their being with you is that there is going to be a focus on development and training of their skills. It is actually necessary and expected by a Gen Y. Promotions are a really interesting one here. I have dealt with a lot of Gen Ys and they want to become CEOs in one year. Baby Boomers believe that you actually have to earn your stripes. That you have to do the hard yards and rise through the ranks for twenty years with no guarantee that you will actually get it. Gen X believe that promotion should be based on merit because it is a performance orientated. It is not based on how long you have been here but rather on what kind of results you have brought to the business. But a Gen Y believes that it is their God given right to be promoted. They cannot see that why at 21 years old that they cannot be managing.

Let us now discuss how to retain each generation. Baby Boomers want long term job security, because they fear never again finding fulltime employment again.

If I want to retain a Gen X, it is about short-term job security. You might say to them that you will keep them around for twenty years (now that is great for a Baby Boomer) but it is horrifying to a Gen X. They have no intention of staying in the same job for 20 years. A lot of Gen X take on projects for two to three years and then they want to outsource their talents and act like a consultant for a couple of years and then come back into the business world and then go back out.

How do you retain a Gen Y? Do you know what they want? Variety. They get bored really quickly. To a Gen Y they do not want to have the same job for five years doing the same thing. That, to them, is total boredom. They want supportive management that doesn’t direct them what to do but rather are there to support them when there is a problem.

They want unharnessed room to show off their creativity and brilliance. They also want superfast promotions—like every six months.

It is really important that if you want to build a great business, you have to build a great team.The key is in understanding what the hot buttons are and being prepared to push them.

“Baby boomers view leadership as hierarchical”

Tony Gattari is founder and Chief Energy Officer of Achievers group.

He is a much in demand passionate professional speaker, business educator, author and corporate and business advisor. He has worked with over 150 businesses around the world. www.achieversgroup. com.au Email: tony@ achieversgroup.com.au Phone: 0410 538 521 57

EXPERTS Nicole Nott

Six ways to avoid court “Ensure that any agreement is captured in writing.”

Nicole Nott specialises in all forms of commercial litigation and dispute resolution at CBP Lawyers.

Contact: Nicole at nrn@cbp.com.au or 02 8281 4605.

58

MAR 2012

B

y implementing a few common sense tips, not only can you lessen the risk of your business being sued or having to sue, but in the event litigation is unavoidable, you will be in a stronger position if the matter does go to court.

There are many compelling reasons why you would want to avoid litigation. It can be time consuming, distracting and expensive, sometimes costing more than the amount in dispute. Time spent preparing a matter for trial takes away time and money from your business. Disputes can also affect employee morale and damage your business reputation. It’s stressful stuff.

1. Put it in writing It’s very easy for things to go awry when there is nothing documenting the agreement between the parties or variations to that agreement. That’s why it’s important to ensure that any agreement you have, whether with an employee, supplier, customer or business partner, is captured in writing and any variations to the original agreement are also documented, approved and signed off.

Having an agreement which clearly sets out what happens when a partnership or business relationship breaks down can minimise the cost of resolving a dispute.It can sometimes be too late to salvage a relationship and reach an amicable resolution once things have started to deteriorate.

And clearly, it’s no use having an agreement if it’s poorly drafted or doesn’t accurately reflect the terms agreed.

If the shoe’s on the other foot and you are the customer, making a contemporaneous file note or documenting the agreement is still important. If they say to you over the phone: “I can provide it to you

by X”, confirm the arrangement by sending them a note or email.

Further, as a business you are in the best position to ensure that the agreement not only documents the arrangement reached, but it reflects the terms on which you want to do business. For example, you can choose specifically to include provisions which make mediation mandatory if there is a dispute.

2. Read the agreement It sounds basic, but once you have an agreement, read it carefully and understand its day-to-day operation. Time and time again, we see examples where an accepted regime falls short of the provisions specified in the contract. Everything goes swimmingly until the parties fall into dispute.

3. Keep them in the loop One of the best ways to avoid conflict and misunderstanding is to ensure your clients or customers know what’s going on. This may include informing them about increases in costs, budgets and scheduling. Discontent can often arise when you fail to meet a cut-off date or attend to seemingly minor things like returning emails and calls promptly.

Respecting your client or customer and keeping them well informed can go a long way towards avoiding litigation.

4. Act before it escalates If you take steps to deal with a hiccup when it arises, you can often prevent it developing into a major problem and positions becoming entrenched.

It’s no use ignoring a glitch or complaint and hoping it will go away. It’s best either to bring the matter to a head or to seek advice from a professional before you do so.

You should also ensure that your management team is effectively trained to identify and resolve disputes and are comfortable enough to raise them with you. Do you have systems which encourage employees to report potential risks?

5. Think about who you want to do business with Ask your referral source or do an internet search and check out your potential clients or customers, employees and suppliers. Ask yourself whether they appear to be an individual or company you want to do business with. Are they the type of client you would want to work with, or the kind of person you would want to recruit?

If they appear to be embroiled in disputes, it’s best to steer clear. Some organisations and individuals have a tendency to attract trouble.You likewise need to think about whether your own company fits the profile of the one that is always involved in disputes.

6. Put yourself in their shoes Try to think objectively, put yourself into the other side’s position and work out what is motivating the decision to litigate or refusal to negotiate. Is it simply personal animosity, or does the other party have a genuine reason for commencing litigation?

There may of course be instances where litigation is advisable or unavoidable, but if you follow these basic tips, you have a much better chance of resolving your dispute amicably or avoiding litigation altogether, a far better outcome than ending up in the courts.

EXPERTS IVAN MISNER

networking and gender

T

here have been a lot of books written about business networking and referral marketing.

I’ve written quite a few of these myself. There have also been a lot of books written about the difference between men and women. However, it dawned on me that no one had ever made the effort to combine the two subjects. With that realisation, a new book project was born.

Over a four-year period, more than 12,000 businesspeople participated in a study focused around 25 simple questions. I gathered together two of my fellow networking experts: Frank DeRaffele, to write from the male perspective; and Hazel Walker to write from the female perspective.

The three of us focused on combining our personal networking experiences with the data and interpreting its greater meaning for readers.

One thing we explored in depth was the following basic question: Are men and women really so different…or do we have a tendency to just focus on what makes us different instead of how we are similar?

Coming to an answer that we could all agree with turned out to be the single most important concept in the book!

As it turns out, men and women are alike in many ways—they just seem to get to the same place using different roads. If men and woman could just understand some basic fundamental points, then they can most certainly be more successful when networking and referring the opposite sex.

It’s interesting that our study revealed two very distinct facts, seemingly at odds with one another.

The first is that both men and women want to get business from networking and are willing to work hard to get it. The second is that they seem to make things so difficult for themselves by only networking in the style their own gender prefers and understands.

This is as counterproductive as a relationship between a man and a woman based either on only what the man wants, or only what the woman wants. If they both want to stay married, they quickly figure out what it takes to make the other person happy and do it. Alot of men get to the point where they: 1. No longer offend women, or 2. Are no longer misunderstood by them.

Until this happens, they will continue to miss out on their potential to do business with women. (The fact that almost half of the world’s population is female should provide great motivation for men to solve this problem!)

On the other hand, though guys may act boorish and offensive at times, most women need realise that, in fact, they play a bit part that enables men to continue that behavior, without even realising it.

Because both men and women make important, money-related decisions based on their assessments of facial expressions, gestures, tone, manners, and even smell, the face-to-face networking process is an opportunity for each gender to learn how to please the other. To grow as a business culture, they must keep up with genderspecific communication styles and preferences. Not only does networking play a major role in growing a powerful business, but it also paves the way for a happy and secure life. Surely, anyone can see the benefits of having a pool of amiable friends and associates ready to look out for them and send good things their way.

It is therefore important for anyone working in the business world to understand both the similarities and differences between the networking styles of men and women. We all want the same outcome; we just have different ways of getting there.

Here are some tips to start you on your way to career-long success in networking with the opposite sex: For women: • When asking for help, communicate clearly exactly what it is that you want.

• When speaking to men, try to impress them and share your accomplishments.

• When spoken to inappropriately, speak up about it immediately.

• Convey an image to others that you are a serious businessperson, in all that you do.

For men: • Slow down and build the relationship.

• Don’t assume women don’t take their businesses seriously.

• Edit what you are about to say, using filters to sift out what is not business appropriate.

• Remember that women are at networking events for business gain, just as you are.

“Both men and women only network in the style their own gender prefers and understands.”

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.

His newest book can be viewed at— www.BusinessNetworking andSex.com.

Dr. Misner is also the Sr. Partner for the Referral Institute, an international referral training company.

59

EXPERTS SUE HIRST

How to thrive in 2012’ “The key to constant improvement is listening to staff, customers, suppliers, shareholders and advisors.”

CAD Partners CFO On-Call is a team of financial and business advisors who work with open minded people committed to business growth and achieving success.

For help call us on: 1300 36 24 36 or visit our website: www.CFOonCall.com.au 60

MAR 2012

M

ost successful business people I’ve spoken with believe 2012 will be tough for some business sectors. We’ve heard about the two speed economy and the unsettled European and US economies are also worrying Here are some tips for thriving in 2012: • Constant Business Model Improvement It’s the way you operate e.g. how you deliver your product or service and how you fund business. Your business model can be a ‘fluid phenomenon’ i.e. constantly tweaked to achieve maximum efficiency and performance. It’s worthwhile engaging the help of an advisor who understands business models.

Having the right model can make business life smooth whereas having the wrong model can result in constant struggle.

Few business owners pay enough heed to their business model. We often hear “that’s the way it has always been done or that’s the way we do it and it works.” This may be so, but could you do it better? Could you fine tune, add, delete or maximise the higher profit producing areas and reduce the low profit ones? Could you find easier ways of distribution, assembly or delivery? What about staff, could some contribute better in other ways?

• SWOT Analysis Have a look at your strengths and how they help you compete in the marketplace and ask how you can build on them. Look at your weaknesses and consider what they’re costing and how you can improve them. Opportunities can be found in places you may not think of. e.g. in our business, ‘cloud commerce’ has shattered geographical barriers, so we’ve begun offering services to geographical areas previously impossible. Threats can be environmental and beyond your control, however, if you consider them and put in place appropriate risk management, you may be ahead of the competition when the proverbial hits the fan.

• Constant Improvement We can all find constant improvements that, when added together, make a huge difference to business efficiency and results. The key to constant improvement is listening to staff, customers, suppliers, shareholders and advisors. The best way to capitalise on constant improvements is to have good systems in place that enable absorption of improvements. That way when you come to sell your business you’ve built a solid asset that can be handed over to a buyer and odds are you’ll get a premium price. A systemized business is easier to

sell to a new owner.

• Cost Management Direct costs are those that are absolutely necessary to deliver a product or service, such as service labour or purchase of product, and are the biggest target for improvement. Research your industry and technology to find better ways of operating. A small improvement in direct costs can have a huge impact on your bottom line. Don’t cut ‘muscle’ in business such as effective marketing or good staff, but look for ‘fat’ or resources that aren’t delivering value.

• Cash Flow Management By 2012, some businesses have had a rough couple of years and getting to the end of their resources.

They may have had to use cash reserves, borrow or reduce overheads. If you’ve experienced cash flow squeeze for the past couple of years and can’t see light at the end of the tunnel, it may be a good time to consult an expert in finance or insolvency.

Consulting an insolvency expert can make a huge difference to your personal outcome of business liquidation. They can help you navigate the rules, so you don’t end up paying an unnecessarily high personal price. They can facilitate negotiations with suppliers, ATO and banks. If your business is impacted negatively by a particular sector of the market you need to keep a close eye on cash flow.

A good indicator of cash flow is calculating liquidity.

A good measure of liquidity is ‘Current Ratio’. This is the result of dividing current assets by current liabilities. It shows the number of times current liabilities are covered by current assets. Banks look closely at this ratio when lending, as they want confidence about loan repayments. Business owners need to know this for their own peace of mind. Here’s an example of current ratio calculation: Current Assets Accounts Receivables $100,000 Inventory/ Work in Progress $150,000 Total Current Assets $250,000 Current Liabilities Accounts Payables $ 50,000 Overdraft $ 50,000 Short term loan payments (12 months) $ 40,000 Total Current Liabilities $140,000 Ratio Calculation: $250,000/$140,000 = 1.79 Meaning for every dollar of current liabilities you’ve got $1.79 of current assets to cover it. Keep a close eye on this ratio, to identify the trend and work at improving the factors affecting it.

EXPERTS BRIAN WALKER

BE AN EMPLOYER OF CHOICE

I

magine being in the situation where you rarely have to recruit staff for your shop floor. Where potential employees approach your business and you have the power to make choices. “Fit” retailers, who find themselves in this enviable position, have better success on the sales floor. Why? Because prospective employees already want to work for you, without persuasion, and have a “pre-existing passion” for your business.

To become an employer of choice you need to put strategies in place to build your reputation, reflecting the way you treat your staff as well as the company values for which you are known.

The Body Shop is a great example of an employer of choice. As well as comprehensive staff training so that each employee understands the business and its values, the company rewards them with additional benefits that reflect these values. Those benefits include a LIFE bonus ($200 to spend on your health and wellbeing) and a LOVE bonus ($200 to learn something new).

Our research indicates that motivated and engaged staff deliver on average 20 per cent higher sales and margin improvement. Indeed, over 70 per cent of exit surveys we do show that staff who initiate leaving do so because they did not feel ‘engaged’ with the business.

So to set you on the road to becoming an employer of choice, here are a few important business “fitness” tips.

• Know what you stand for and how to express this to create your company culture. Remember, reflecting your true values will attract the kind of staff that you want for your business.

• Set the right tone in your communications.

Having a consistent set messages is so important, as is your company tone of voice.

More often than not, the tone will reflect the senior company leaders at Owner, CEO or MD level and will be a reflection of their personality.

• Walk in the shoes of a potential employee.

Regularly check how your company is communicating to your potential employee audience.

• Ask what can you offer potential employees.

How is your offer different to others? Apple tells prospective employees it’s “a store like no other and a career like no other,” as well as communicating the core values of the business McDonald’s is upfront about what employees can gain welcoming prospective employees with

“love the opportunity”. But most importantly, its list of benefits truly reflects the company ethos: “it sets you up for life; you’ll make new friends; the hours are flexible; there are great discounts and it’s a safe environment” are all powerful statements guaranteed to make McDonald’s an employer of choice.

• Create advocacy. The most powerful tool you have to create an employer of choice ‘profile’ is your own employee base. Again, Apple uses this brilliantly through testimonials: “If someone was thinking about working in an Apple store, I would tell them to do it. It’s an environment with amazing people and products. You’ll have the time of your life.”

Of course, whether you are an employer of choice or not, you will still need to recruit at some stage and finding the right people to represent your business is the most essential investment you can make. What makes a great candidate for your shop floor? I tell my clients to follow the “Fit Five” principles when looking for superb store staff: • The smile. If a person can’t pull off a smile in an interview then they either don’t really want the job or smiling just doesn’t come naturally.

Optimism, positivism and happiness go a long way in a people-to-people business.

• The homework. Always ask them what they know about your company. With a mountain of information on the internet, every applicant should be prepared.

• The vision. I used to work for a manager who would ask short listed applicants to provide feedback on what they saw in a few stores and how they would improve the situation. This is a fantastic way to quickly understand what the applicant actually sees and their structure of approach in response.

• The achievements. What an applicant has achieved is more important than what they say.

Ask them to explain an issue, their action and the solution. Look for facts, figures and how they achieved the solution in their answers.

• The human being. I like to ask applicants if they can outline a mistake or failure in their career— after all, everyone makes mistakes or has failures (otherwise how are they developing and growing?)

Look for humility, what they learnt and how they developed from it.

Happy fit retailing.

“…put strategies in place to build your reputation.”

Brian Walker is Managing Director of Australasia’s leading retail consultancy, Retail Doctor Group.

For more on Retail Doctor Group’s business fitness programs email businessfitness@ retaildoctor.com.au or phone 02 9460 2882.

61

SME ASSOCIATION OF AUSTRALIA The SME Association of Australia (SMEAA) has had a fast and busy start to 2012. In this issue, I want to touch on Minister Mark Arbib, the power of social networking and businesses with hearts.

Minister for Everything

I

n early 2012, SMEAA Chair Matt Johnson and CEO Caroline Hong met with Senator Mark Arbib, Federal Minister for Small Business. We had a positive introductory discussion on SMEs, the role of SMEAA and how we can collaborate to help SMEs grow and prosper.

The first comment from Minister Arbib as he shook my hands were “Hello, we met on Twitter.”

I reminded him that we actually first met at the Vinnies CEO Sleepout in 2011, an event where more than 1000 CEOs of businesses around Australia slept rough for one night and collectively raised $4.2 million to help eradicate homelessness.

Arbib acknowledges that the Small Business Minister has been called Minister for Nothing, and yet it is a portfolio for Everything.

Our SME infographic explained everything. SMEs in Australia represent 99.7% of total business in Australia. Why don’t we have a Minister for SMEs, rather than a Minister for Small business?

Since our first meeting, our office has been receiving regular media releases which we were able to immediately disseminate to the business community. They relate to reminders of cyber crimes, tax cuts, reminders for BAS and tax agents to renew their registration, Fair Work Australia reviews and more. All the updates can be found on our website and the SME Forum on LinkedIn.

Social media networking and discussion Last December, SMEAA created a new LinkedIn group called the ‘SME Association of Australia—SME Forum group’. The forum has already attracted several hundred members and hosts quite a few 62

MAR 2012

lively discussions. I have received emails commenting on the usefulness of such a forum for SMEs. I was a social media sceptic before but now find it can bring tremendous benefits for the SME sector. I am finding that new online business connections often also lead to a deeper level of business relationship when we connect offline.

Also online, new resources and new directory listings have been added on our website www.smeaustralia.asn.au New information and resources have been added, relating to Marketing, Tourism, Business Directory , Media & Publications, including Indigenous business and much more.

Businesses with hearts I recently came to hear about the NSW Hotels Have Hearts of Gold program. It was fantastic to learn that since 2002, a volunteer committee working behind the scenes to raise vital funds for Matthew Talbot Homeless Services (a Special Work of the St Vincent de Paul Society) through the Hotels Have Hearts Gala Dinner. The committee and major sponsor the Hilton Sydney celebrated 10 years of hard work and the Valentine’s Day launch of ticket sales for the upcoming Gala Dinner with a giant and aptly shaped heart cake at the Matthew Talbot Hostel.

Not many people understand that when something like this happens, it is often not just the financial support, but that it builds skills and confidence, keeps families together, provides comfort and a safe environment for people to heal, and allows marginalised people to retain or regain their dignity — and it is the totality of this gift that leaves a lasting impact. www.

Hotelshavehearts.com Many of you have organisations that you

support and volunteer for. Business leaders can do a lot to create change in society through their networks and leadership voice. Associations have tremendous power to connect businesses and lead socially responsible actions.

In 2010, I took part in the Vinnies CEO Sleepout, joining hundreds of CEOs of businesses in Sydney, sleep out rough for one night to raise necessary funds for homeless services. Last year, I joined more than 1000 CEOs across all major cities in Australia. from small and large businesses, and collectively we raised $4.2million This year will be the third year that I will be taking part in the CEO Sleepout.

I am now on the 2012 Vinnies CEO Sleepout Committee (CEOSAC). SMEAA will be supporting Vinnies’ efforts to raise awareness and will play a role to link businesses to socially responsible programs such as this one. Business leaders often want to make a difference in society for a worthy cause. I have pre-registered for the CEO Sleepout scheduled for 21 June 2012.

I do hope you will support me in rising to the challenge, by donating for the homelessness project against my profile on. www.ceosleepout.org.au . Every cent goes directly to Vinnies in providing services for the homeless in Australia.

The SME Association of Australia gratefully acknowledges our Platinum Corporate Members, Hilton Worldwide –Australasia and ActionCOACH, and our

“Brad Sugars captivates.”

Connect • Grow • Prosper www.smeaustralia.asn.au

Women SME partner, the Success Women’s Network.

ActionCOACH Many of you would know of Brad Sugars’ tour around Australia and New Zealand in February this year. I was privileged to attend his talk on Business is Booming in Sydney, in a packed room filled with more than 600 people. I understand similar crowds greeted him in Perth, Melbourne and Brisbane. It was inspiring to hear Brad say that you don’t grow your business, your employees do ... so invest more time, energy and effort recruiting great people and they will build a great company for you. I have never before sat through a presentation non-stop for three

Caroline Hong with Brad Sugars hours without feeling bored. Brad has that exceptional positivity and energy to teach and motivate people.

It was good to hear Brad tell the audience that the SMEAA is a good organisation to partner with. Thank you to ActionCOACH for being our Platinum Corporatemember partner.

Caroline Hong CEO of the SME Association of Australia.

Caroline welcomes comments on this column. info@smeaustralia.asn.au www.smeaustralia.asn.au www.twitter.com/#!/SMEasnAU Join us on LinkedIn Discussion group SME Association of Australia-SME Forum www.linkedin.com/groups/SME-AssociationAustralia-SME-forum-4213012 www.facebook.com/SMEassociationAustralia

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24% Of small businesses are unaware of the opportunity for instant depreciation of the first $6500 of any new capital assets introduced by the federal government last July.

58

MAR 2012

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Source: Bicycle Network Victoria

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Source: Efinancialcareers.com.au Bonus Expectations Survey

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Source: Carbon analytics firm RepuTex

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Source: Telstra-COSBOA Back to Business Study

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