Paul Wallbank – Brilliant Communications

Tag: business

  • No exit

    No exit

    The men’s hairdresser down the road from me has hung up his scissors after twenty-four years.

    The sign on his shop window apologizes and the shop itself is up for lease. Shortly there won’t be any evidence a long standing local business was once there.

    Roy had no exit from his business and he sell the operation as a going concern.

    For Roy his retirement will be funded solely out of his savings. If he’s lucky he’ll have saved enough of his income from the business for a comfortable retirement – unfortunately many small business owners they’ll eke out the rest of their lives on the pension.

    Even for those who have planned for an exit, many of their plans have fallen over in the aftermath of the 2008 financial crisis.

    It’s always been questionable whether Gen X and Y entrepreneurs could afford to pay the sums for the affluent retirement of Baby Boomer business owners but now the post 2008 contraction in lending means it’s even less likely retiring business owners like Roy will find someone to buy their businesses.

    While the focus is on twenty something app developers selling their businesses for a billion dollars, the truth is that wealth for most business owners lies in the local newsagent, hairdresser or coffee shop owner being able to sell their operation for a reasonable return.

    For many baby boomer business owners it’s going to mean working more years than they intended and sharply reduced retirement expectations.

    Property values too are difficult. Many boomer businesses had the sensible model of buying the property their business occupies as a retirement nest egg.

    Again those properties are too expensive for the new generation and the deleveraging economy means the outlook for property values isn’t good.

    On every level, things are going to be tough for those wanting to sell businesses over the next decade.

    Those who do get good prices for their businesses are going to be those doing something exceptional to gain attention with income and profits that make them stand out from the cloud.

    Just being the best hairdresser in the neighbourhood or having a popular cafe isn’t going to be enough.

    Hopefully Roy The Barber managed to stash away enough for a well deserved comfortable retirement.

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  • ABC Sydney Mornings: Explaining the Cloud

    ABC Sydney Mornings: Explaining the Cloud

    Paul Wallbank joins Linda Mottram on ABC 702 mornings to discuss how technology affects your business and life.

    This week we’re talking cloud computing from 10.40am this Wednesday May 9 on ABC 702 Sydney. A lot of this topic has been covered in my posts on The Connected Business.

    During the show we’ll be covering the following topics on cloud computing.

    • What is this? How does this – or how is it meant to – work?
    • What can you put there? Anything?
    • What use is it suited for?  And NOT suited for?
    • Is it meant to be archival storage?  or is it meant to be something more dynamic?
    • Can anybody access it?  Is there substantial technical limitation?
    • Is it secure, safe?  If yes, why do many people seem to be making lots of scary noises?
    • Does it work better for:
      •   individuals?
      •    small business?
      •    large business?

    We’d love to hear your views so join the conversation with your on-air questions, ideas or comments; phone in on 1300 222 702 or post a question on ABC702 Sydney’s Facebook page.

    If you’re a social media users, you can also follow the show through twitter to @paulwallbank and @702Sydney.

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  • Depreciating the future

    Depreciating the future

    When I wrote my first book back in 1998, one of the things my editor and I did was look at the cost of buying and maintaining technology.

    Regardless of how we chopped the costs up, it came up consistently that the purchase cost of a personal computer was around a third of the Total Cost of Ownership (TCO).

    The TCO concept is something forgotten by people – be it a minister announcing a billion dollar purchase of jet fighters, a CEO boasting how he’s opened a hundred new outlets this year, or a family buying an investment property.

    It was bought sharply into focus for me when one of my kids claimed he couldn’t use his government provided school laptop because the IT guy didn’t have the repair software to fix a problem.

    Despite millions being spent on providing these computers, little has been allocated to maintaining them.

    This is typical of the public education sector, early in the adventure of building a computer support business I learned that services to schools and universities were fraught with difficulties as many would infrequently receive a fixed amount for capital expenditure but nothing for ongoing maintenance. You see this in the conditions of buildings on many campuses.

    Forgetting operating and support costs is something we all fall for.

    Strangely motor vehicles are the only area we consistently factor in maintenance and running costs, probably because we get the fuel price shoved in our face every time we take the car for a drive.

    While computers are becoming disposable items just like fridges and TVs were maintenance isn’t so much an issue given most last five to ten years before needing expensive repairs, its still true for many capital items.

    There’s another aspect to forgetting costs – depreciation.

    Depreciation allows us to factor in the declining value of our business assets yet I keep meeting people who treat depreciation as income or even an asset in itself. This is particularly true among real estate investors who prefer to buy newly built apartments for the higher depreciation deductions they can claim against tax.

    Bizarre stuff and true bubble thinking where people think operating losses will be offset in the medium term by capital gains.

    One of the aspects of 1980s thinking is that business costs like training and maintenance can be palmed off elsewhere or infinitely deferred. That isn’t the case.

    In society and business, we’re seeing the effects of pretending these costs don’t exist. Somewhere in there lies opportunity.

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  • Customer service gods

    Customer service gods

    “Treat your customer service people like gods,” says online business advisor Todd Alexander.

    One of the conceits of the 1980s business model was that customer service, like training and capital investment, is an expense that should be driven down at all costs.

    In corporations, government departments and politics those who dealt directly with the customers, taxpayers or voters were seen to be the low level, low status employees who could be outsourced at the first possible opportunity.

    That was great when markets were growing and there was an abundance of low hanging fruit to be plucked from the marketplace.

    Now that customers are cash strapped and margins are falling, keeping customers happy becomes more important.

    A statistic often quoted is that acquiring a new customer costs five times more than keeping an existing one, that difference may be exaggerated but it’s not far from the truth.

    Those departing customers can do great damage to the business as well.

    In the 1980s customers had little recourse apart from taking their business elsewhere. Often they didn’t have that choice in sectors where duopolies reign.

    Now customers can vent their frustrations to the world on the web or through social media and there’s no hiding from the loss of reputation.

    What’s more, many of the businesses that relied upon picking the low hanging fruit of a growing economy, high immigration or increasing consumer debt to find more customers through the last thirty years now find the rules of changed.

    Customer service now matters.

    Any management that considers customer service to be low status is a dinosaur and will soon be following them.

    It’s a good time to be disrupting comfortable business models.

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  • Cargo cults and your business

    Cargo cults and your business

    “We need an interest rate cut” thunders the business media.

    “Give us GST relief” plea the big retailers.

    “China will boom forever” assert the government economists.

    “Big corporations will buy us out for a billion dollars” pray the hot new start ups.

    “I’ll win the lottery this week” thinks the overworked cleaner.

    We’re all waiting for the big saviour that’s going to rescue us, our business or the economy.

    It could be a big win, a big client or a big government spending program to rescue us.

    Sadly, should we lucky enough for that saviour to arrive, it may not turn out to be all we expected.

    There’s many lottery winners who curse their win while many disaffected founders who watch their startup baby fade away neglectful new owners.

    For a lumbering department store, tax changes will do little to save them from market changes their managements are incapable of comprehending.

    Interest rate cuts are great for business when customers are prepared to take on more debt but in a period where consumers are deleveraging a rates cut will do little to stimulate demand.

    The clamour for interest rate cuts are a classic case of 1980s thinking; what worked in 1982, 1992 or 2002 isn’t going to work the same way in 2012.

    What’s more, the Zero Interest Rate Policies – ZIRP – of the United States and Japan are a vain attempt to recapitalise zombie banks saddled with overvalued assets rather than an effort to help the wider economy.

    China is more complex and there’s no doubt the country and its people are becoming wealthier and there are great opportunities.

    The worry is most of what we read today could have been the wishful thinking written about Japan thirty years ago. Lazily selling commodities to the Chinese while they create the real value is not a path to long term prosperity.

    In business we have a choice, we can pray for luck or we can make our own luck.

    Some choose to join the cargo cult and pray, or demand, that someone else does something. Others get out and do it.

    John Frum gravesite image by Tim Ross through Wikimedia Commons

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