Small businesses in Australia are increasingly being led by women. In our experience as a lender, women’s approach to running an enterprise can sometimes give them the edge over their male counterparts.
Women are still under-represented in the leadership of ASX 200 and other large businesses in Australia – a recent article in the AFR stated that women account for just over a third of all managers in major Australian companies. This figure that has barely changed in the last 12 months. However, the picture in SMEs (small to medium enterprises) is very different.
According to the Xero Boss Insights 2020 report, the growth in the number of Australian businesses led by women is outpacing the growth in those led by men. In 2019, there were 1.4 million male business owners, up from 1 million in 1991, which is an increase of 40%. However, the number of female-led businesses grew by 80% in the same period, up from 420,000 to 800,000.
The same Xero report states that women have taken the lead over men in founding businesses in the healthcare, and education and training sectors. It suggests the pace at which the business ownership gap is being closed is likely to speed up during the 2020s, as more tertiary-educated young women develop their careers and approach the peak age for being their own boss at 45.
According to outgoing Small Business Ombudsman Kate Carnell, research has shown that for many women, starting a business provides the flexibility to work from home, the opportunity to pursue a passion, and the ability to better juggle work and family commitments.
As a lender, I can confirm that one of the defining characteristics we’ve noticed among our women clients is that they don’t appear to be as reluctant to ask the question everybody else is afraid to ask. It is often the answer to that question that leads to business improvement and efficiency gains. Or alternatively pivoting the business model to operate better.
An example of this is Banjo client, Fiona Horman, founder and Managing Director of Regency Media Pty Ltd. Under Fiona’s stewardship, Regency Media has expanded over its 35 years in business to become a diversified group comprising digital media manufacturing and distribution, licensing and publishing.
Its customers have included the world’s largest film studios and music businesses including Twentieth Century Fox, Sony, Disney, MGM, Icon, Madman, EMI and Mushroom Records.
Its licensing division Shock Entertainment sells physical entertainment products through JB Hi-Fi, Big W and Sanity. Regency’s publishing division Five Mile focuses on children’s books and publishes brands such as The Wiggles, Trace Moroney, ABC for Kids, Thomas the Tank Engine and Miffy.
By offering a full supply chain solution – manufacturing, warehousing, distribution and licensing – Regency has established a sustainable advantage over its competitors.
Fiona has this advice for women founding or running their own business, “Irrespective of your gender, it is important to be resilient. Always be prepared for the unexpected, it happens to everyone. Don't be afraid to ask for help and advice when you need it. To this end, it is extremely beneficial if you can find a good mentor to discuss all and any issues with.”
Another Banjo client Erica Hughes is the owner and director of the health food business Slendier. This fast expanding business began in 2013, with Erica purchasing the brand in 2017 with a strategy to grow the business in terms of geographic expansion, marketing and new product development.
Slendier focuses on all-natural, plant-based, healthy and delicious food that is genuinely good for you. Having come from a corporate background, Erica was looking to make a change and gain happiness through a new career journey that involved her owning and setting the strategy for her own business. The Slendier business now sells in both supermarkets and online channels throughout Europe, the Middle East, South East Asia, China, Australia and New Zealand.
Erica says it’s tough for anyone to own a global business right now and you need to back yourself with every decision. Erica’s advice for other female entrepreneurs is to “be confident, boldly step over each roadblock, seek out mentors and others who inspire you and also take time to look after yourselves”.
According to the Xero Boss Insights 2020 report, the growth in the number of Australian businesses led by women is outpacing the growth in those led by men.
Another perspective comes from Sonja Pfitz of Pfitz Financial & Business Solutions, a commercial finance broker for SMEs, specializing in local and global funding solutions for manufacturers.
Pfitz Financial has a wide range of clients from small to large companies, some of which are publicly listed, that operate in a range of industries including steel (metal), plastics, Defence, food & beverage, chemicals and medical sectors.
Sonja’s 25-year career in finance and in the ownership of various businesses has given her first-hand experience and insights into the funding challenges faced by manufacturing companies.
Sonja’s advice for SME women in manufacturing businesses is “Own your vision with passion and transparency. Be wise in surrounding yourself with specialists in their field to support you and the growth of your business. Never take a setback or not winning a client as defeat or failure, it is a challenge that will make you even more successful, from the lessons you have learned. Most of all take time to look after yourself… healthy mind & body is a healthy, happy effective director.”
Of course, the picture isn’t completely rosy, as there are still hurdles faced by women running their own businesses. Various studies, both local and international consistently show that women entrepreneurs are hindered by three main issues in comparison to their male counterparts:
International Women’s Day recently brought some great focus to women and their achievements. Hopefully, we’re getting closer to a time when women’s contributions and achievements are recognised as a matter of course, not just on a special day.
In this second part of our SME digital opportunities article, we look at how an online eco system of integrated software can make your life easier, free up your time and minimise effort. You needn’t be tied to your desk or office – you can set it up so you access your data from anywhere, using your tablet, laptop or phone. What’s not to love?
Among the functions that can be integrated are:
Start by subscribing to an online accounting software solution.
By moving your books to the cloud, you can get rid of the tedium of manual data entry that sucks up your time and resources. Typically, you’d connect the software to your business bank account so that your transactions flow automatically from the bank to the books. Because you can access your accounts from any web browser or from an app on your phone, your current financial position is at your fingertips at any time.
This includes things like income and expenses, and assets and liabilities. Most systems come with tools for quoting, invoicing, managing bills and so on.
What about security, you ask?
The information in the cloud is encrypted, similar to a bank’s, so only people with the login can see the data. However, you may want to include your accountant or other business adviser.
As it’s online software, there’s nothing to install or update – all your data is backed up automatically. More saving of time and effort.
Online point of sale software
Next, to your online point of sale software which can integrate a breakdown of all items sold, quantities, discounts, surcharges and payments (by tender type such as cash or EFTPOS) with your accounting system. This includes a summary of the amount of tax applied to each transaction.
No matter how much you sell, success ultimately comes down to the collection of the cash. Common traps include having no accounts receivable staff member, no collection process or late invoicing. Debt collection software makes the process simpler, more timely, and a lot less work.
For example, all account information will be stored in one central place, available on one screen. It allows you to automate invoices and attach PDFs to email. You’ll be able to automate sending invoices to your customers faster. You can automate your comms so customers they know they’re getting close to terms, when they’ve reached the due date, and later by how far they’ve passed it, without you having to do anything at all. This also helps to manage any disputes down the track.
By leveraging technology and integrating online tools, you can greatly improve efficiency and productivity, which should also lead to an increase in sales.
Inventory
Inventory is the next small business challenge that can be conquered by an integrated digital app. There are various simple apps that let you ditch the spreadsheets and keep track of inventory items, even on the go via a tablet, smartphone or laptop.
The key components of an inventory management app are the tracking of the two main warehouse functions, receiving and shipping, but other features and optimisation can be added. For example, it can automatically enter dates and use your device’s camera to read barcodes.
HR (human resources) software
Finally, to HR (human resources) software. Many small business owners may think of HR as being something that only big companies do, but any business with staff has admin to manage. HR software helps you keep track of those tasks, data and processes.
Simple processes like annual leave and sick leave allowance, absence tracking, training and company policies can be automated via this software. No more hunting around in insecure filing cabinets for the employee records when they ask you for some time off!
At the more sophisticated end, it can help you manage onboarding and payroll, and streamline processes to increase overall productivity and work management.
In conclusion
Each of these individual software options are useful in themselves. By leveraging the technology and integrating these online tools, you can greatly improve efficiency and productivity, which should also lead to an increase in sales.
In business, as the saying goes, if you do what you’ve always done, you’ll get what you’ve always got.
You’ve probably been told numerous times that digital technologies and tools for your business will save you time, streamline your whole operation, and can enhance your business growth. Not to mention potentially reducing your stress levels.
So what’s holding you back?
According to an analysis by Deloitte Access Economics into the Benefits of Small Business Digital Engagement, 31% of small businesses said they were put off by what they perceived as the high cost of digital. A surprising 20% said they just hadn’t thought about it. And 13% said they were not sure how to use digital tools.
So let’s tackle these three inhibitors.
1. Costs
Of course there will be initial set-up and training costs. Yet failing to adopt technology will be far more expensive in the long run.
Essentially, the more digitally sophisticated a company is, the more likely it is to have higher revenues, better profits and increased staff potential.
Deloitte found that for every step they take up the digital ladder, businesses earn more revenue per employee. Businesses who had an advanced level of digital engagement, earned an average of 60% more revenue per employee, than those who had only a basic level of digital engagement.
2. Hadn’t thought about it
What are your business priorities? Ask yourself how you can enable those priorities with digital technology.
Whatever you feel you’re spending too much time doing, there will almost certainly be a digital solution for it. Would you rather focus on growing your business and sales, instead of working to produce reporting or doing admin?
A cloud based accounting platform will enable you to do just that. As long as you have an internet connection, cloud tools can be accessed from just about anywhere. You only pay for the tools that you use, and you can scale them up to meet your requirements as you grow.
A major benefit of cloud accounting platforms is being able to work collaboratively on them. Using an accounting platform that your accountant can access to review is much more efficient. It will give better, quicker reporting that’s more likely to be accurate. So when talking to potential lenders or strategic partners, everything you need is at your fingertips.
Businesses who had an advanced level of digital engagement, earned an average of 60% more revenue per employee.
3. Don’t know how to use digital tools
Maybe you’re still using time-consuming, manual processes, for example for inventory management.
Yes, technology can be initially daunting, but there are literally hundreds of experts out there. You may well have one among your family, friends or business advisers who’d be willing to walk you through a particular digital platform that could help you. The platform companies themselves can provide someone to give you a demo and answer all your questions. There are plenty of training programs to help you and your staff get on board.
Finally, the holy grail is software integration. Digital tools can of course be run separately, but integrating them - connecting them together – means even greater efficiency. You’ll have better oversight and be able to use analytics reports to help you monitor your business.
Here’s an example of software integration from business.gov.au:
Think of the huge time savings, and the ability to prevent you or your staff from updating wrong information.
No matter how small your business, digital technologies can help you build and be better at what you’re doing. Digital is no longer a “nice-to-have” for your business, it’s essential.
In a welcome piece of great news, Australia has signed the world’s largest comprehensive free trade agreement, known as the Regional Comprehensive Economic Partnership (RCEP), along with 14 other Indo-Pacific countries.
Collectively, the 15 countries who have signed up to the Agreement make up about a third of the world’s population and around a third of global GDP ($26.2 trillion).
Despite the current political and trading tensions with China, Australian businesses can celebrate this development, which will offer trading and commercial opportunities for Australian companies of all sizes. The RCEP could not have come at a more important time given the scale of global, economic and trade uncertainty.
Eight years in the making, the Agreement covers trade in goods and services, plus investment, economic and technical co-operation. The participating nations are Indonesia (who led the negotiations), Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam.
Expected to be ratified in early 2021, the Agreement will progressively lower tariffs over the next 2 decades and allow more free movement of goods. It will create new rules for electronic commerce, intellectual property, government procurement, competition, and SMEs.
According to Trade Minister Simon Birmingham, “This agreement covers the fastest growing region in the world and, as RCEP economies continue to develop and their middle classes grow, it will open up new doors for Australian businesses and investors.”
There will be improved export opportunities for Australian businesses, especially the financial services sector, education, health, engineering and other professional services. It will further integrate Australian exporters into a booming part of the globe."
Simon Birmingham - Australian Federal Trade Minister
So what’s in it for your business?
When the Agreement is finalised, the main benefits for Australia will be:
To prepare for this, SMEs will need to restructure their global supply chains and look at transitioning to new regionally integrated networks. It will also be essential that your business is digitally and technologically enabled, with the corresponding level of preventative measures on cyber security.
According to PwC’s recent report ‘Asia Pacific’s time’, to enable companies especially SMEs to expand regionally as well as adopt new technologies, governments must play a role in supporting upskilling, as well as enabling access to capital and expertise.
Take some time to think about what opportunities the RCEP can offer your business, and what you need to do to reach these potential markets.
Some recent headlines generated by one or two of the big banks made chilling reading. At least one bank has implied that they’re looking to wind up small and medium enterprises (SMEs) that are perceived as “not doing well”.
The bank in question undoubtedly has its reasons for that approach, and must appease shareholder concerns about the bottom line. At the same time, SMEs would probably prefer to feel that their lender is working with them, not against them.
Part of the problem is the model that’s used to determine the worth of a business. The major banks conduct fundamental credit analysis on largely historical financial information (a largely rear vision mirror approach to the business) sometimes supplemented by a cash flow projection for a limited view of the road ahead.
This type of analysis hones in on certain financial ratios that are seen as an indicator of the business’ health and the likelihood of servicing the debt.
Small businesses are so much more than just numbers on a spreadsheet, and it takes an experienced relationship banker to find deeper insights. Looking at a business holistically tells us a lot more about not only where the business has been, but where it’s going.
Relationship Banking is essentially a combination of fundamental credit analysis and algorithmic lending with the overlay of experienced credit personnel, who work closely with a client to understand their business.
Understandably, many SMEs’ past experiences with bankers, or just general fear, can make them avoid talking to their lender if they’re concerned about the business.
Chances are, if one of our small business clients is doing it tough, we probably already know because of our existing strong relationship with them and their adviser. If we’re not working with them to help get through it, we soon will be.
In over five years as a business lender, we’ve found that businesses in potential strife who talk to and work with us, end up turning the corner. Those who are sweeping it under the carpet, and having sleepless nights – that can be a different story.
Small businesses are so much more than just numbers on a spreadsheet, and looking at a business holistically tells us a lot more about not only where the business has been, but where it’s going.
Our focus is always on helping SME owners assess the reality of the business situation and understand the possible solutions. Then the options can be discussed, tested, and implemented.
We often advise our clients to go over their business plans to find ways to:
While it’s true that not every single business in trouble can be saved, it’s only a tiny minority who are beyond help, and usually because the owner has left it too late.
Small business owners are generally resilient, driven, and professional. Many have poured their heart AND their brain into their business. Lenders must be ready and willing to help find solutions, not closures.
Business continuity planning (BCP) is often somewhere towards the bottom of a business’ “to-do” list, and tends to stay there. 2020 has brought into sharp focus the need for BCP to jump off the list and into practice. If you haven’t re-evaluated most aspects of how your business works in the light of COVID-19, now is a good time to start.
You may be thinking, just let me get over this crisis, before I worry about how to cope with the next one. But a continuity plan is best put together in ‘peacetime’ – it’s too late once the next disaster hits.
Survival can often depend on a single factor: preparation. A robust business continuity plan can help you cope more easily when a crisis arrives, and minimise the damage your business could suffer. It allows you to be better placed to take advantage of any economic opportunities, either during or after the crisis.
So what exactly should a best-practice BCP entail, and how can you prepare well for the next shock to the system? There are various off-the-shelf BCPs available through risk management consultancies. Whether you decide to go that way, or build your own, the key elements will include:
Finally, think strategically. If your business has a strong balance sheet and good capital position, this could be a good time to think about mergers and acquisitions.
Putting a BCP in place will bring benefits over and above preparing your company for future negative events. It will almost certainly mean you learn more about your business, and maximise your chances of success.
Of the many changes we’ve seen in the past 8 months, which will stick and which won’t? The massive reduction in air travel could well be temporary. The growth in demand for online shopping and services, will likely be a keeper.
Do you have digital and data mining processes in place for detecting and analysing further changes in customer behaviour? These will occur in response to a range of developments like the lifting of shutdowns, border re-openings, travel bubbles and increased hygiene practices.
According to The Harvard Business Review studies on habit formation suggest it takes a minimum of 21 days to learn a new habit, but in reality the average timeframe is closer to 66 days (just over 2 months).
By now, the pandemic’s severe disruption has lasted long enough to cause fairly major shifts in habits that had previously been the foundation of demand and supply.
According to Australia Post, between March and August 2020, over 8.1 million households shopped online, an increase of 16% when compared to the same time last year. Importantly, over this same period more than 900,000 new households shopped online for the first time. That’s 35.4% more than the same period in 2019.
Travel habits have undergone a huge shift. With the explosion in online conferencing, it’s hard to see how business travel will ever go back to pre-pandemic levels.
Domestic tourism could boom in the next one or two years, only to drop off in favour of long-haul destinations once (and if) a vaccine is developed. There’s potential for huge pent-up demand with overseas tourists thronging back to Australia when interstate and international travel is permitted again. Or will they become travel-shy, and look to explore much more of their own respective backyards?
For a kind of precedent, we can look to the 9/11 terrorist attacks. According to the Harvard Business Review, the aftermath of the attacks caused only a temporary decline in air travel. Instead, they created a lasting shift in consumer acceptance of the trade-off between privacy and security. The result has been permanently higher levels of screening and surveillance.
COVID could potentially create long term greater expectations of hygiene and health screening practices.
Investing in your digital offering is a priority like never before.
A new McKinsey Global Survey of executives has found that since the pandemic, companies have accelerated the digitisation of their customer and supply-chain interactions, and of their internal operations by an average of three to four years.
Most of the respondents said that their companies implemented at least temporary solutions to meet many of the new demands, much more quickly than they would have thought possible before the crisis.
At the same time, the respondents expect most of these changes to be long lasting and are now making the kinds of investments to ensure they will stick.
Think about your business’ digital processes whether they’re going to serve you into the new normal. Look at things like:
In part 2 next time we’ll look at business continuity planning and preparing for future pandemics.
Cashflow is the lifeblood of our businesses. With some of the government coronavirus business packages set to end or start phasing out – most notably JobKeeper – now more than ever is the time to plan and manage your cashflow before we reach the “stimulus cliff”.
Lance Rubin CEO and Founder of Model Citizn joined a Banjo webinar recently to talk about how cash flow analysis can help SMEs make better decisions for the future of their business.
Lance explained that cashflow modelling is a process of designing and constructing a decision-making tool for the various scenarios that can impact your business.
Also known as scenario analysis, it can help you plan mathematically for business risks and see what the cashflow outcome would be. Scenario planning is about looking forward, not backwards, using numbers.
Some typical scenarios could include what happens if:
It also helps you pinpoint if you have a sensitivity to one particular variable in your business, for example: staffing levels, or one large debtor.
Do you know how long your current cash reserves will last?
What impact will JobKeeper tapering off over the next 6 months have on your business?
Will you be affected when some of the other stimulus measures end?
In the light of this consider what are your business options now, and what might those look like if you did something different. It could be pivoting your business to a new market, reducing staff hours or numbers, or sourcing materials offshore. You can play with the different scenarios, and while not all of them will work for you, it will give you ideas and choices. It’s good to have options.
Having the ability to play with this is key. However, it does need to be well set up in the first place. You can use a variety of tools on the market, or simply start with a spreadsheet. Various types of cashflow analysis can be produced from the information you already have, such as: income statement; balance sheet; cash flow statement.
Lance demonstrated via live charts the effect on the cash flow position of pulling various business levers. If we make changes to ‘x’ or ‘y’, what impact will that have on our cash?
Ideally, work with your accountant, who can help with the compliance and legal knowledge. Most importantly, know what you want to find out from this. Start with your historical cash flow; look at your profitability; get it all put in a spreadsheet that you can change.
This could be vital if you’re looking to borrow or top up your loan. Traditional lenders often just look at historical data, which is only an insight into the past. While many of the new wave of business lenders do take into account past data, they also place a strong focus on future cashflow analysis. This will also be true of other stakeholders in your business.
Being able to explore potential scenarios will help to reduce uncertainty you may feel about the coming months as you navigate the changed business environment. While nothing can provide complete certainty, cashflow modelling can help reduce anxiety about the future.
The second wave of coronavirus lockdowns in Victoria has caused a delay in our national economic recovery, but there is hope over the horizon.
Even though the lockdown is in only one state, it has meant a large chunk of the national recovery timelines have been pushed back 3-6 months. This is largely because:
Andrew Charlton, economist and director of research firm AlphaBeta said “It’s clear that the Victoria lockdown is having a psychological spending impact across Australia,” he said. "The impacts are being seen as far as WA – which shows that even with border closures, you can’t keep out the economic impacts of COVID-19. Confidence will only get back on track once there are clear measures in place – across all governments – about how we manage to live and work with the threat of COVID."
Demand drivers are missing
Predictions are that in 2021 the average unemployment rate could be as high as 8.8%. This means consumer borrowing ability and wage growth will be low.
Population growth that helps drive consumption and investment will also be well down - possibly half the normal rate of growth. This is due to
These demand-driven factors will hurt business investment and growth.
There are some industries who have already been hit very hard and won’t see revenues return to anything like pre-COVID levels for a while. If businesses in these industries have large debt we can expect two things:
Now for the good news
Australia is better off than most economies globally, having sustained the least impact on GDP among the group below.
The Government has produced some well targeted stimulus to date and there is still enough in the coffers to spend. Compared to many others around the globe our gross debt to GDP is relatively healthy at well below 50%.
With record lows the cash rate can’t go down, therefore there is pressure on fiscal stimulus. The Government will probably respond and adjust their stimulus packages.
As restrictions start to ease, businesses will re-open. From our long experience of business owners we know they are innovative, positive people and good leaders. There is evidence of this in all States across Australia (Victoria will pick up later) where confidence is returning.
Lending will be the cornerstone for investment and growth. Each business loan application will be looked at based on their unique circumstances. Lending for growth will now require a forward projection assessment instead of purely relying on historical performance. This in turn requires the lender to be able to access business’s financial data and forecast positions. On this basis, traditional lenders will struggle to approve loans or change their model. Alternate lenders like Banjo are key to helping drive the economy back.
