Frequently Asked Questions - General

I was speaking with Anre Grimaux, editor of the "Caboolture Shire Herald" on Thursday last and he said that business conditions in the region have been particularly grim in the past two weeks. I thought of becoming all-academic and telling you why but a little birdie reminded me of a 50's cartoon. The words went something like this:"Don't tell me why I'm sick, Doc. Just tell me how to get better."

The bottom line is that business has no control over what is happening to consumer sentiment. Consumers are keeping their money and credit cards firmly ensconced in their wallets because the Reserve Bank is determined to dampen the effect on growth of the government's stimulatory spending and the resources boom, by upping interest rates.

What small business should be doing is looking for a match between what they've got to sell and what their customers are willing to buy. Sounds simple, doesn't it, but my experience is that it seldom happens.

A few years ago, that well-known icon of fast food, McDonalds, was in all sorts of strife in the US: sales had tanked and the share price was in free fall. What didn't help was that one punter purposely ate nothing but Maccas, put on a huge amount of weight and developed high cholesterol and blood sugar, all recorded for a documentary. Today, Maccas is stronger than ever: they offer healthy alternatives and some of their products now have the tick from the Heart Foundation and the seal of approval from Weight Watchers.

The message for small business is there. McDonalds did not change their branding one bit - the golden arch is still here, there and everywhere as is Ronald McDonald. What they did was survey their regular patrons and others to discover what people actually wanted from a fast food outlet and what leisure trends had passed Maccas by in their strict adherence to burger type meals. The results of the survey are there for all to see: healthy choices and McCafe!

There are two lessons here: survey your customers and don't change your brand which you've spent valuable time and money establishing. By this I mean, if you are David Jones or Myer, don't become Crazy Clarks overnight.

Conventional wisdom is that 50% of your sales will be to existing customers, 25% to people referred by existing customers and 25% to people attracted to your advertising.So what you should now be doing in this lull is surveying your existing customers to see whether they can offer an opinion as to how you can improve and whether they are willing to provide you with a testimonial - and REWARD them for their cooperation.

Why a testimonial? Simple, a testimonial is the next best thing to a referral. Use them in your marketing and advertising and your sales are sure to leap ahead of those of your competitors.

What reward? The classic reward is a discount voucher. What you are giving away may well be part of the profit you never had. Why a discount voucher? Simply because all you are giving away is some of your margin! If you give away somebody else's product, you are giving away something whose value is loaded with their margin. A tip though - limit the time they have to use the voucher. In times as tough as these, make the timeframe fairly short.

What sort of survey? Your survey should ask what we eggheads call quantitative and qualitative questions. The first begs yes/no answers or a ranking on a scale of 1-5 or poor-excellent. The second asks for a considered, written piece of advice or comment and is often more valuable.

To hark back to our 17th century thinker: the key is knowledge. If you are armed with the knowledge gained by your survey, you can tweak your business and your marketing and advertising to meet your market's needs and wants because you'll know what they are. You're no longer guessing and running about in a panic like a chook with its head off.

As Nike says.....Just Do It!

IF YOU WANT HELP IN CONSTRUCTING YOUR SURVEY MAKE AN APPOINTMENT ON 1300 450 810.........IT'S A FREE OFFER UNTIL 31 JULY!!!!

>>>>>>>>>>BOB LAMONT 18 June 2010

As we come into yet another long weekend that will eat into productivity, I thought I'd look briefly at 3 things:-

(1) At 5.2%, the unemployment rate has dropped to within 20 basis points of what the RBA considers to be the natural rate of 5.%. There is a very real danger that the economy will overheat and there will be a breakout of wage demands. The Rudd government's "return to the past" industrial relations policy will probably exacerbate the problem and the RBA will be forced to tighten monetary policy to settle things down. That means more interest rate rises. As luck would have it, the economy grew only 0.4% last month, within the RBA's acceptable range. So we might have some relief over the coming couple of months.

(2)I recently attended a talk by celebrated marketing expert Peter Capp. He was great although much of what he had to say was a rehash of stuff I've heard before - and have actually written about. He used lots of statistics by survey groups like AC Neilsen. Two are well worth passing on. He used a stylised graph to show how consumer sentiment has changed in favour of "shopping local": inner city shopping is on the nose with consumers and big shopping centres are on their way out too. Where the growth is is local shopping where parking is readily available, the shops are convenient, there's a shared sentiment of being part of a community and after-sales service is easier to get. Up 15% in fact! Woollies recognises the trend; here's betting that there's a Woollies within 5 kms of where you live.

(3) This statistic astounded me! Less than three percent of small businesses have any sort of of a business plan. He knew I was an accountant and asked me how many of my clients had a plan and I baldly lied: 50% I told him knowing that no matter how many times I've told people how essential it is to plan in business, they just shake their heads in a not-again-sort-of-way and ignore me. If you want to mend your ways for the new financial year - and you bloody well should - we have a business plan template we can email you for FREE!

The main gift that Tuesday's Budget offered to small businesses like yours and mine was a bright & rosy economic future for Australia.

Malcolm Turnbull was probably right when he criticised the Rudd Government for hanging in with the economic stimulus package too long and undoubtedly, the administration of the rollouts was an absolute disaster.

But the major role of Government is to take a macro view of the economy and install a fiscal policy that works for the goood of the country. And the Rudd Government has done that according to Treasury: the highest point we will hit in net Goovernment debt is just 6.1% of Gross Domestic Product (GDP), the deficit is 35% down on forecasts made in the 2009 Budget and the Budget will return to surplus in 3 years, three years ahead of projections.

Not only that, but during the global financial meltdown, the stimulus package saw the economy grow by 1.4% against potential negative growth of 0.7% and the creation of 225,0000 new jobs. Projected unemployment of 8.0% never materialised; unemployment peaked at 5.25% and is expected to trend downwards to 4.75% within 2 years.

We are the envy of the Western world and it's not hard to see why. Britain is a basket case and the new Tory-Liberal Democrat coalition is talking up big on severe belt tightening. The US threw money at the meltdown with some success and moved to regulate their financial markets but they still face many years of hundreds of billion dollar deficits. Greece where they've had 10 years of corrupt, inept Socialist Government has been bailed out by the International Monetary Fund (IMF) and European Community to the tune of 750 million euros (>$1 trillion) and faces a recurring interest bill alone of nearly 30% of its current GDP combined with virulent cvil disodeience by overpaid, underperformed public servants.

Other good news from the Budget papers is that Treasury reckons our economy will grow around 3% on average in coming years but that inflation will be 2.5%, midway in the 2-3 percent band desired by the Reserve Bank. The RBA disagrees, thus its obsession with raising interest rates 6 times in 8 months! Only time will tell which gaggle of economists is on the button of course.

But the bad news is that Treasury reckons that against falling unemployment, wages will increase by around 4% per annum. And economists in various think tanks around the place reckon skilled employees are looking around to change jobs, so those key staff you kept on during the tough times might just be thinking of giving you short shrift.

The only "special" giveaways to small business happened last Sunday week with the release of Swan's response to the Henry Review: immediate write-off of assets costing up to $5000, 30% depreciation rate for all assets not buildings, and a drop to 28% corporate tax rate 3 years ahead of the big boys.

But there might also be something in the small print in the Budget. The Government is going to encourage savings in interest bearing securities by making the first $1000 tax free. And it is also going to encourage the issuing of corporate bonds which along with government bonds, will create an alternative to depositing funds with the Big 4 Banks: it will allow smaller lenders access to funding that is an alternative to going offshore. It also seems likely that the Government will allow the Australian Stock Exchange (ASX) to trade in these bonds, ctreating new, attractive opportunities to investors who are overwiight in equities. The Government is well aware that the Big 4 Banks have put a tight squeeze on business borrowing and may be leading the way out. Of course, a changed lending landscape won't materialise overnight unfortunately.

An important ingredient in the Budget is the 40% super-profits tax on miners. Miners have been kicking up a stink but the Rudd Government appears to have no ideas of entertaining a back-flip on this one. One of the complaints of the miners has to do with the Government's definition of "super-profits"...UNDERSTANDABLY!

"Super-profits" are profits greater than the prevailing bond rate, currently about 6 percent. As my business clients know I encourage an EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) of above 30% and a net profit in the twenties if possible. That's a bloody side more than the going bond rate!!

Nevertheless, Traeasury says that all the concessions to business and to employees (eg, the lower corporate tax rate & increased super contributions) are immutably tied to the mining super-profits tax and if the Government gives away to pressure from miners then the other side of the ledger will be changed, hitting the welfare of all Australians. Therein lie the politics!!!!

BOB LAMONT 12 May 2010 >>>>>>>>>>>>

Great sadness for Bill Adams and family, Wayne, Dean, Bubba and Shelly and their kids. On Thursday 16 March, I got an early call from Nick, Bill's right hand man at Bill Adams Tiling and great mate. He had tragic news: Sandy Adams, Bill's wife of 48 years had died suddenly during the night.

Sandy was one of the most beautiful people I've ever had the pleasure of being able to call a friend and my wife who was something of a soulmate of Sandy's and I will miss her wicked sense of humour. Too young!

As a mark of respect for Sandy, Bill and the family, the CPBMAC office will be closed on 24 March 2010. Those of us who knew her will be attending her funeral at the Albany Creek Crematorium at 10 am.
Bob Lamont>>>>>>

The PM, Kevin Rudd, recently admitted that he hadn't read the Henry Review of the "roots and branches" tax system. Rudd had himself commissioned the 1,000 page review which was 18 months in the making. He claimed that he was too busy playing Don Quixote in "fixing" the hospital system to devote a few nights' reading to the review and has demurred to the Treasurer, fellow Nambour boy and certainly no friend of the PM, Swan, to out before the May Budget. This only under pressure from Swan and other Cabinet members who are concerned that Rudd's earler refusal to let the review see the light of day until later in an election year was, to say the least, ill-advised. Bob Lamont 18th March 2010>>>>>>>>

The Australian reported some interesting stats about Self Managed Super Funds on 11th March 2010. "A survey of SMSF investors who have term deposits linked to their funds found that 34 percent held more than half their portfolios in cash, while 33 percent said their allocation was between 25 and 50 percent."

The survey was conducted by U Bank (subsidiary of the NAB) and found that 66 percent blamed the GFC (Global Financial Crisis) for their conservatiism, 75% said they chose to manage their own super to gain "control", a significant percentage said they swapped from managed super funds because of fees and poor returns and 95 percent said they would not be switching back. It's probably a shame that these people missed out on the recovery-driven rally of the stockmarket, but such is the cost of security! There are reportedly about 600,000 SMSF's in Australia.

Cash accounting is the recording of income and expenses as THEY COME IN OR GO OUT. Accruals accounting is the counting of income and expenses when INVOICES ARE ISSUED OR RECEIVED. (Sometimes, you will receive a number of invoices from a supplier in a given month, then a statement at the end of the month. You should check that the invoices and statement match up but accrue only the statement.)

This varies from business type to type. For example, accountancy practices, medical practices and legal practices are most often bought and sold on a multiple of fees.

Pharmacies are usually bought and sold on a Return on Investment (ROI) factor – the last time I looked it was 17% in metropolitan areas and 20% in provincial areas and the turnover and prices of pharmacies are pretty much controlled by the pharmaceutical product suppliers who often arrange and guarantee loans in order to hopefully “tie” pharmacies to them. Other businesses are increasingly being sold on an ROI basis, which is much better than in the “olden days” when they sold for the aggregate of net profit, fixtures, fittings, plant & equipment & stock at value.

Just note that a valuation based on ROI is not inclusive of the value of stock. Also be aware that if you are buying or selling a business it is a potentially complex matter, taking into account things like leases and capital gains tax, the application of which varies from entity to entity and person to person depending on factors such as percentage of ownership and age. Be very careful, get expert advice whether buying or selling!