Different Economy Levels Cause Problems

Small businesses in some parts of Australia, primarily in Western Australia and Queensland and in the mining industry, are achieving considerable growth whilst the rest of the country struggles and in some areas businesses are going backwards financially.  This is the effect of the "two speed economy".

The Reserve Bank has kept the official cash rate the same at 4.25% which means there has been no variation in the last three months whilst many small business operators argue that consumer confidence is very low and the economy needs assistance by the lowering of interest rates.

Some economists are forecasting a "two phase economy" to emerge during 2012.  There is a belief that struggling areas of Australia are already in the first phase (tough going) and that this will last another three to six months.  Around September 2012, there are hopeful projections that there will be a considerable uplift in economic activity (the improved phase).  The problem for many small businesses is survival in the meantime.

There is some expectation that the Reserve Bank will lower interest rates in May or June (perhaps after they have absorbed the impact of the Federal government's budget).  If the economy does go into the so called "second phase" there is a real possibility that interest rates will start to rise again as economic activity increases.  It is obviously a very difficult period for business operators.  Cashflow is tight and banks are difficult to deal with. 

Cashflow management remains probably the biggest single challenge for small businesses, particularly the management of debtors and stock.  If you have concerns about any aspect of your business operations please contact us.

Leadership Inclusiveness

One of the seven points made in the study into Leadership, Culture and Management Practices of High-Performing Workplaces in Australia, conducted by Christina Boedker of the Australian School of Business, was - "Higher performance is created through quality and inclusiveness of leadership as well as innovation". 

"The successful leaders of today must understand that their power rests with the people for whom she or he is responsible.  To tap that power, the leader must abandon the old baggage of dominance, control and self-centredness."  Don Argus ex CEO of NAB and Chairman of BHP Billiton.

Inclusiveness goes hand-in-hand with innovation and is the key to creating an innovative workplace culture.  To tap the power of their people, leaders must first get to know their employees and colleagues, establish good relationships and trust, develop mutual respect and include and involve them, to the maximum extent possible, in as many aspects of the organisation as are appropriate.  Doing so will release the innovative ideas that are inherent within any group of people working towards a common goal.  Good leadership is vital for good business operations.  If you're interested in discussing leadership issues, please contact us.

Marketing/Sales Hints

Slow Moving Stock - If you have slow moving stock in your business, is it possible to package the slow moving stock with other stock items to sell them as packaged products?

Joint Marketing – Have you explored the opportunities of marketing your services/products in conjunction with other businesses?  You could create an opportunity for joint marketing and promotion with businesses located in the same shopping centre.

Promotion – Promoting your business means creating an attractive image that will stay in peoples' minds and persuade them that you have something better to offer.  This "public face" has several sides to it including advertising, public relations and direct selling.

Government Grants For SMEs

Enterprise Connect Grant for Manufacturing Businesses

Enterprise Connect is a Federal Government programme that is available for a number of industries including the Manufacturing industry.  The definition of "manufacturing" adopted by the government is:
"The physical or chemical transformation of materials, substances or components (being the products of agriculture, forestry, fishing and mining or the products of other manufacturing units) into new products or firms whose predominant activity meets this definition are classed as "manufacturing" for the Enterprise Connect Programme.  Firms whose dominant business activity is software development, can also be eligible if their business process is a translation of users need into the software product including the process of analysing needs, designing solutions, writing programmes, testing the programmes and implementing the programmes to solve problems.  Eligibility requirements depend on the business location and turnover or expenditure".

For manufacturing or manufacturing related businesses located in the metropolitan areas of Brisbane, Sydney, Melbourne, Adelaide and Perth, the minimum turnover or expenditure requirement is, at least, $2 million in the current financial year or one of the two preceding financial years (maximum $100 million).

If the business is located in a regional area the minimum turnover or expenditure is, at least, $1.5 million in the current financial year or one of the two preceding financial years (maximum $100 million).  If the manufacturing or manufacturing related business is located in a remote location, the minimum turnover or expenditure is $750,000 in the current financial year or one of the two preceding financial years (maximum $100 million).

An application needs to be lodged with Enterprise Connect.  If a business is deemed to be eligible, a Business Advisor, contracted by Enterprise Connect, will conduct a free business review of the business to ascertain the type of assistance that the business may require.  The type of assistance made available is virtually any project to be undertaken by an independent third party which will improve the business' operations.  Grants of up to $20,000, on a 50% subsidy basis, can be made available to small businesses that have been reviewed by the Enterprise Connect Business Advisor and then invited to submit a formal application for consulting work to be undertaken.  Some of the projects that could be undertaken include:

  • business strategy planning
  • supply chain management
  • human resources issues
  • lean manufacturing
  • export strategy 
  • business management systems
  • quality management systems
  • business plans
  • market research
  • change implementation to factory layout etc

The "5S" System Can Improve Efficiency

Many manufacturing businesses have established procedures and practises with a view to reducing wastage in the workshop by initialising the "5S" system.  The "5S" system (a structured systematic approach to housekeeping and a cornerstone of any world class manufacturing operation) can assist a wide range of businesses. 

"5S" involves creating an organised workplace using the following steps:

  • SORT - sorting and removing unnecessary items
  • SET IN ORDER - a place for everything and everything in its place
  • SHINE - cleaning the work area
  • STANDARDS - establishing the rules and standards for the business
  • SUSTAIN - maintaining the standards in a disciplined way.

The Enterprise Connect programme may be able to assist eligible manufacturing businesses to implement a "5S" system to improve efficiencies within the business. 

Business Plans

Advisers - Questions within a Business Planning Questionnaire" on "advisers" could include:

  • Who are your advisers?
  • Have you appointed advisers such as:
    • accountant?
    • solicitor?
    • insurance broker?
    • marketing consultant?
    • advertising agent?
    • business coach?
    • sales coach?
    • business development consultant?
    • industrial relations/human resources consultant?
    • financial adviser/planner?
  • Are you effectively utilising the services of your advisers in helping you to add value to your business?
  • Do you accept that the role of advisers in SMEs is similar to the role that employed experts play in larger businesses in that those employed experts, who specialise in particular areas of expertise, are there to advise the chief executive officer and senior management of a larger company on business operational issues?

If you have any queries on how you might utilise advisers in your business, please do not hesitate to contact us.

Customer Advisory Committees - Some small businesses have formed Customer Advisory Committees.  Have you considered this in your business?  Do you think it would be beneficial?  Could you list 3-4 customers who you could invite to meet with you, on a quarterly basis, to discuss your products/services and give you feedback as to what is happening in the market place and suggestions on improvements in your business activities?

If you would like to discuss the operations of Customer Advisory Committees, please do not hesitate to contact us.

Next month we will consider the role of legal advisers for small businesses. 

Research And Development

If you haven't already registered for research and development expenditure incurred by your company for the year ended 30th June 2011, you have until the 30th April 2012 to do so.  Please contact us if you need any assistance.

"Think Tank Workshops" Can Help

Many SME operators have benefited from participating in a Think Tank Workshop with their key staff and, in some cases, their entire team, for the purpose of reviewing all aspects of the business' operations.

Thank Tank Workshops can be presented as a full or half day workshop to review a range of activities including:

  • financial matters
  • market and customers
  • cashflow including:
    • debtors
    • stock
    • work in progress
    • bank covenants
  • performance review including:
    • key performance indicators
    • ratios
    • analysis of financial accounts
  • business operational review including:
    • costs review
    • team members performance review, training and mentoring
    • review of bank lending agreements, covenants etc
    • insurance review
    • leadership review
  • Succession planning review for both the owners of the business and team members' positions within the business.

If you are interested in participating in a Think Tank Workshop in your business please contact us.

Written Guarantees Help

One way to remove a fair amount of hesitation by a buyer in the purchase process is to offer a written guarantee that, if the customer is not happy with the product or service you've provided, you'll happily refund their money. 

Various surveys have indicated that only a small number of guarantees are ever activated by customers and that the giving of the written guarantee satisfies the purchaser that you are "bona fide".

Account Application

If you are offering credit terms to customers, it is sound commercial practice to request that the potential customer completes an application for credit facilities.  If you would like assistance with the design of a suitable "application for credit form" for your business, please contact us.

Offer Different Methods For Payment

People expect businesses to accept different methods of payment including credit card, cheque, EFTPOS, direct debit etc.  Whilst there are some set-up costs for some of these payment facilities, in most cases you will find that your customers appreciate a variety of payment methods which normally leads to increased business occurring.

What Does It Mean?

Financial Stress Testing

Financial stress testing is a test that the banks require their customers to undertake to satisfy the bank that the small business has the ability to repay the loan irrespective of the prevailing financial conditions.

Financial stress testing requires the business to prepare best and worst case scenarios taking into account:

  • sales levels;
  • gross profit margins;
  • operating expenses; and
  • interest rates.

If you receive a request from a bank for an interview regarding financial stress testing, please contact us.


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